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The US derives enormous economic benefits from issuing the dominant global currency. This exorbitant privilege has been put at risk by the combination of the 2022 sanctions against Russia and new technological developments, specifically Central Bank Digital Currencies. CBDCs promise faster,...
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the world earning a positive net investment income. To rationalize this phenomenon, I propose a different theory about the … dollar exchange rate. In the model, world financial intermediaries demand US safe assets for their convenience value, but US … intermediaries do not demand foreign safe assets. Under an aggregate symmetric financial shock, the rest of the world buys more safe …
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