那提西银行-全球-金融理论-“储备货币诅咒”与欧元-20180207-6页_641kb

Flash Economics: The "Reserve Currency Curse" and the Euro

Core Content

This document discusses the economic implications of the euro's role as a reserve currency, contrasting it with the United States' situation under the Triffin paradox. The Triffin paradox, introduced by Robert Triffin in 1960, highlights that a country whose currency is widely held as a reserve must maintain an external deficit and external debt to supply financial assets to non-resident investors. This creates a "reserve currency curse", where the increasing external debt undermines the currency's credibility and leads to financial vulnerability.

The euro, while being a reserve currency, does not exhibit the typical characteristics of a reserve currency-issuing country. The euro zone has an external surplus and no external debt, which means it does not supply financial assets in euros to non-European investors. This leads to structural overvaluation of the euro, as there is excess demand for euros when non-European investors seek to invest in them, especially during periods of stability.

Main Points

• Triffin Paradox: A reserve currency-issuing country must have an external deficit and external debt to provide assets to non-resident investors.
• Dollar's Case: The United States, as the issuer of the dollar, has both an external deficit and external debt (Charts 1A and 1B).
• Euro's Contradiction: The euro is a reserve currency, but the euro zone has an external surplus and no external debt (Charts 2A and 2B), which contradicts the expectations of a reserve currency issuer.
• Exchange Rate Dynamics: The euro appreciates sharply when non-European investors seek to invest in euros due to the lack of available assets for non-residents.
• Oil Prices and Euro: There is a positive correlation between oil prices and the euro's exchange rate. When oil prices rise, oil-exporting countries accumulate foreign reserves and buy euros, leading to increased demand and appreciation.
• Investor Behavior: Non-European investors tend to stop buying euros during recessions or periods of economic/political uncertainty (Chart 3), but resume investments when stability returns, causing the euro to appreciate again (Chart 4).

Key Implications

• The euro's reserve currency status is incompatible with its external surplus and lack of external debt, leading to structural overvaluation.
• The "reserve currency curse" does not apply to the euro, as it avoids accumulating external debt.
• However, this overvaluation is inherent and occurs outside of crises, making the euro less competitive in international markets.

Summary of Charts and Data

• Chart 1A: United States has a current-account deficit (as % of nominal GDP).
• Chart 1B: United States has net external debt (as % of nominal GDP).
• Chart 2A: Euro zone has a current-account surplus.
• Chart 2B: Euro zone has no net external debt.
• Table 1: Shows the structure of foreign exchange reserves by currency, with euros holding a significant but decreasing share over time.
• Chart 3: Non-European investors reduce euro purchases during economic uncertainty.
• Chart 4: Euro appreciates after periods of economic stability.
• Chart 5A and 5B: Highlight the correlation between oil prices and the euro's exchange rate, driven by the demand for euros from oil-exporting countries.

Conclusion

The euro, despite being a reserve currency, is structurally overvalued due to the lack of external debt and the absence of a supply of euro assets for non-residents. This overvaluation is a direct consequence of its reserve currency status and the external surplus of the euro zone. While the euro avoids the "reserve currency curse" associated with the dollar, it is subject to chronic overvaluation, which can impact its competitiveness in global markets.

Disclaimer

• The document is intended for professional and qualified investors only.
• It is confidential and not to be disclosed to third parties without consent.
• The information is not personalized and does not constitute an investment recommendation.
• No liability is accepted for the content or its use.
• The views expressed are the personal opinions of the authors and may differ.
• The document is not subject to legal requirements promoting investment research independence.
• The stocks mentioned may have specific disclaimers available at the provided link.