Optimal currency shares in international reserves翻译

1. IntroductionThe euro has been in existence for seven years, and euro notes and coins have been in circulationfor four years. Although it is still premature to evaluate the full implications ofthe only majorcurrency established for more than a century, its successful introduction has already brought significantconsequences for international finance. For example, a growing number of firms and sovereignsraise external finance issuing euro-denominated securities. The use of the euro as a currencyfor the settlement or invoicing of international trade transactions has also shown a notableincrease in recent years (ECB, 2005). There is concern that portfolio shifts from dollar-to eurodenominatedassets, in particular, by central banks, could result in a sharp appreciation of the eurorelative to the dollar. And a key question among politicians, academics, and the public is whetherthe euro will challenge or eventually displace the dollar as the leading international currency.The prospects of big portfolio shifts from the dollar to the euro and the euro taking on someof the dollar’s roles in the international financial system seemed unlikely a decade ago, when thefirst stages of European Monetary Union were designed. Some did argue that the euro couldachieve the prerequisites for a major international currency (Alogoskoufis and Portes, 1991,1992, 1997; Portes and Rey, 1998; Bergsten, 1997) and considered the consequences for internationalportfolio allocation and exchange rates. The dominant view, however, held that theeuro’s international impact would be small (e.g., Frankel, 1995; Eichengreen, 1998) or that theexpansion of its role would be very slow (Hartmann, 1998a, 1998b). Indeed, many were skepticaleven about its legal and technical foundations, its short- to medium-term viability in theface of currency market pressures and its long-run impact inside Europe (e.g., Feldstein, 1997).Those who doubted that the euro would be successful stressed that the Eurozone was not an“optimal currency area” and could therefore lead to tensions among member states in the conductof monetary policy. Moreover, the non-unified political voice of Europe would impede theeuro’s internationalization. Its role would be little more than that of the Deutsche mark—boththeory (network externalities, e.g., Rey, 2001) and history (dollar and sterling, e.g., Eichengreen,2005) suggested great inertia in the international status of currencies. The incumbent dollar wasso dominant that only a cataclysmic shock could threaten its hegemonic status.Now, however, the prospect that the euro will at least challenge the dollar’s role in globalmarkets sounds less implausible. The euro zone is comparable with the American economy interms of GDP and trade openness, and it may even become larger when non-eurozone EU membersjoin in.