布鲁盖尔-Does-money-matter-in-the-euro-area_-Evidence-from-a-new-Divisia-index_16页_624kb

The Euro as an International Currency: Summary

Core Content

This document explores the international role of the euro and evaluates whether expanding its use would be beneficial for the European Union (EU). It outlines the economic, financial, and political factors that influence the international use of a currency, with a focus on the euro and the US dollar.

Main Benefits of a Greater International Role for the Euro

• Reduced dependence on the dollar: A more prominent international role for the euro would decrease the euro area's reliance on the US dollar, thereby limiting the ability of the United States to use the dollar as a tool for political objectives that may conflict with EU interests.
• Financial autonomy: Greater use of the euro would reduce the extraterritorial influence of US financial and economic policies.
• Economic advantages: The international use of the euro could bring pecuniary benefits such as lower transaction costs for domestic users and potential denomination rents for euro-area banks.

Key Determinants of International Currency Use

The international role of a currency is influenced by the following factors:

• Economic size: The GDP and trade volume of the issuing country are crucial, as they create network externalities and attract more users.
• Financial market development: Liquidity and depth of financial markets reduce transaction costs and support the use of a currency in investment and reserve functions.
• Financial stability: A stable financial system enhances the currency's role as a store of value and reserve currency.
• Policy stance: Proactive policies and a central bank willing to support international use can promote a currency's global status.
• Capital mobility: Free movement of capital is essential for the international use of a currency.
• Political and military power: These factors also play a role in the international prominence of a currency.

Historical Context

• The US dollar has been the dominant international currency since the end of World War II, with the euro consistently being the second most used currency in the first 20 years of its existence.
• The rise of the dollar was closely tied to the US economic and political power, as well as its role in the Bretton Woods system.
• After the collapse of the Bretton Woods system in 1973, the dollar's share in international reserves fluctuated between 50% and 70% through 2015, while the euro remained in second place.

Current International Use of the Euro

• Reserve currency: The euro accounts for about 21% of global foreign exchange reserves, compared to the dollar's 63%.
• Debt securities: The dollar still dominates in international debt issuance, though the euro has gained some ground.
• Cross-border payments: The euro is the second most used currency in cross-border payments, with the dollar maintaining its lead.
• Settlement/invoicing currency: The euro is the primary currency for trade invoicing and settlement between the euro area and the rest of the world, though its use is more pronounced in Europe than in other regions.
• Foreign exchange markets: The dollar remains the dominant vehicle currency, with the euro accounting for about 31% of foreign exchange trades in 2016.

Challenges and Constraints

• Financial stability: The euro's international role is closely tied to the stability of its financial system. During the financial crisis, the euro's share in international debt issuance dropped significantly.
• ECB's neutral stance: The European Central Bank (ECB) has historically maintained a neutral attitude towards the international use of the euro, unlike the Bundesbank.
• Institutional development: The euro area needs to complete banking and capital markets unions, issue common bonds, and advance a common foreign and defence policy to enhance the euro's international role.

Policy Implications

• The European Commission's 2018 proposal on the international role of the euro was a starting point rather than a decisive step.
• Institutional reforms and policy changes are necessary to increase the euro's international role, though these measures are complex and may have broader economic implications.
• The euro's potential for international use is constrained by the lack of a fully integrated political and military structure, as well as the relative underdevelopment of its capital markets compared to the US.

Conclusion

While the euro has not yet surpassed the dollar in international use, its role is steadily growing. However, achieving a more significant international role requires substantial institutional and policy reforms. The euro's success depends on enhancing financial stability, market integration, and political coordination within the EU.