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Privilege lost? The rise and fall of a global currency

Published on 31 May 2024

Visuel - Monnaie mondiale

Post No.357. As a country becomes larger and more diversified, default becomes less likely, leading to lower interest rates and higher borrowing capacity. We show that the larger a country’s share in the supply of safe assets, the lower is its bond liquidity premium. If the dominant country grows less than the rest of the world, its status as a safe haven erodes.

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Updated on 31 May 2024