Affiliation:
1. School of Management, Mahindra University, Hyderabad, Telangana, India
2. Birla Institute of Management Technology, Greater Noida, Uttar Pradesh, India
Abstract
In recent times, numerous commentaries have written about de- dollarization. We analyse the factors which are contributing to de- dollarization. On the economic front, there is reduced fiscal and financial capacity of the US economy that can strain economic trust in the dollar. The internationalization of the Chinese currency is another factor. Additionally, a lower forecast for the world economic growth outlook, a higher debt financing in the United States, and a war in Europe are also leading to central banks around the world buying more gold and reducing investment in the US treasury bonds. While these factors may lead to reduced demand for dollars and increase the use of alternate international currencies, including digital currencies, we argue that dislodging the dollar as a global anchor currency is at best going to be restricted by economic and geopolitical reasons. JEL Codes: E42, F33, F34