Thursday, July 7, 2022
  • Login
CEO North America
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
  • Home
  • Business
    • Entrepreneur
    • Industry
    • Innovation
    • Management & Leadership
  • CEO Interviews
  • CEO Life
    • Art & Culture
    • Food
    • Health
    • Travel
    • Environment
  • Opinion
  • News
  • Multimedia
No Result
View All Result
CEO North America
No Result
View All Result

How Much Does the US Dollar’s Primacy Depend on Investor Demand?

in Opinion
How much does the us dollar’s primacy depend on investor demand?
Share on FacebookShare on Twitter

When investors across the world look beyond their own borders, they often put money in assets denominated in US dollars. This demand is crucial for the dollar maintaining its global importance and role as the world’s preferred reserve currency, suggests research by Chicago Booth’s Ralph S. J. Koijen and Princeton’s Motohiro Yogo, who add that were investors to seek safety elsewhere, this could have big implications for currency markets and the US economy.

The researchers deconstructed the convenience yield, or premium associated with holding the US dollar. They calculate it to have been 1.3 percentage points between 2008 and 2017. That is, had the US dollar lost its special status, it would have depreciated, and the expected annual appreciation would have been 1.3 percent a year higher thereafter. And parsing out which investors mattered most in terms of supporting the convenience yield, they identify Pacific investors (in Australia, Hong Kong, Japan, New Zealand, and Singapore), followed by European investors and those in offshore financial centers such as Bermuda and the Cayman Islands. European investors alone, for example, accounted for 0.35 percentage points of the dollar’s convenience yield—so if only these investors were to decide to hold a different currency, it is likely that the dollar would weaken by 0.35 percentage points.

The advantage of being special

Investors pay a premium, the convenience yield, to hold US dollar-denominated bonds. Losing that status could cause yields to rise. This, of course, has implications for asset markets. If the US dollar were to lose its status, the country’s long-term bond yields would rise 2.15 percentage points, according to Koijen and Yogo. They trace this to the effects of investor demand from offshore financial centers (responsible for 0.53 percentage points), Pacific investors (0.52 percentage points), European investors (0.51 percentage points), and foreign exchange reserves (0.48 percentage points). Also, stock prices would fall without the special demand for US equities. Thereafter, expected returns for US stocks would be 1.7 percentage points higher, they write, driven most strongly by European investors.

(Courtesy Chicago Booth Review/ By Emily Lambert)

Tags: dollar primacyforeign investors

Related Posts

Passive etfs are surprisingly active
Opinion

Passive ETFs Are Surprisingly Active

How dealmakers can capitalize on market volatility
Opinion

How Dealmakers Can Capitalize on Market Volatility

Regulatory cooperation
Opinion

Electrifying Your Digital Transformation

5 things hr should consider when addressing wage transparency laws
Opinion

5 Things HR Should Consider When Addressing Wage Transparency Laws

Mandated financial disclosure leads to fewer innovative companies
Opinion

Mandated Financial Disclosure Leads to Fewer Innovative Companies

Automaker ceos urge congress to lift ev tax credit cap
Opinion

A New Era for Fuel Retailers

Collaborative advantage: activating the power of many
Opinion

Collaborative Advantage: Activating the Power of Many

Why locking in subscribers is bad for business
Opinion

Why Locking In Subscribers Is Bad for Business

Smart cities, smarter public health
Opinion

Smart Cities, Smarter Public Health

Standing still is not an option
Opinion

Standing Still Is Not an Option

No Result
View All Result

Recent Posts

  • U.K. Prime Minister Boris Johnson Resigns
  • Passive ETFs Are Surprisingly Active
  • Amazon Secures Stake in Grubhub, Gets into Food Delivery
  • Job Openings Fell in May as Demand for Workers Remains Strong
  • Microsoft’s $68.7 Billion Deal for Activision Faces Probe in the U.K.

Recent Comments

    Archives

    Categories

    • Art & Culture
    • Business
    • CEO Interviews
    • CEO Life
    • Editor´s Choice
    • Entrepreneur
    • Environment
    • Food
    • Health
    • Highlights
    • Industry
    • Innovation
    • Issues
    • Management & Leadership
    • Multimedia
    • News
    • Opinion
    • PrimeZone
    • Printed Version
    • Travel
    • Uncategorized

    Meta

    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org

    CEO Latin America | ES

    • CONTACT
    • GENERAL ENQUIRIES
    • ADVERTISING
    • MEDIA KIT
    • DIRECTORY
    • TERMS AND CONDITIONS

    Editorials – george.hatfield@ceo-na.com
    Advertising – media@ceo-na.com

     

    AUSTIN

    600, Congress Avenue 14th Floor
    Austin, TX.
    78701
    USA
    +1 512 649 0340

    NEW YORK

    387 Park Ave South,
    New York, NY.
    10016
    USA
    +1 212 796 64 15

    CEO North America © 2022 - Sitemap

    No Result
    View All Result
    • Home
    • Business
      • Entrepreneur
      • Industry
      • Innovation
      • Management & Leadership
    • CEO Interviews
    • CEO Life
      • Art & Culture
      • Food
      • Health
      • Travel
      • Environment
    • Opinion
    • News
    • Multimedia

    © 2022 JNews - Premium WordPress news & magazine theme by Jegtheme.

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In
    Are you sure want to unlock this post?
    Unlock left : 0
    Are you sure want to cancel subscription?