Economists design stress-test model of dominant currency
Geopolitical shocks can disrupt its hegemony, but dollar remains secure, NBER paper finds
Economists Michael Bordo and Cécile Bastidon have proposed a stress-testing model that could help clarify the conditions under which dominant currencies can change.
Their model, published this week in a working paper by the US National Bureau of Economic Research, is calibrated on data since the start of the classical gold standard, which lasted from the 1870s until the outbreak of World War I in 1914. The authors say this allows them to conduct “prospective analysis, taking into account a broad
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