BIS paper models dollar’s debt dominance

US dollar

The pattern of movements in the US dollar exchange rate fits its role as the dominant global currency for debt contracts, according to research published by the Bank for International Settlements.

Authors Egemen Eren and Semyon Malamud develop an international general equilibrium model to explain how the dollar’s role in debt can affect its dominance.

Because expansionary monetary policy supports debt sustainability during downturns by boosting inflation and depreciating the exchange rate, the

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