US Dollar, Reserve Currency, GDP, Debt, Deficit, Monetary policy, Inflation
Abstract
The US dollar has historically held the position of the world's primary reserve currency, a status shaped by a confluence of historical events, economic dynamics, and geopolitical factors. This paper investigates the multifaceted causes and determining factors that have contributed to the USD's enduring dominance, including the evolution of the US debt-to-GDP ratio, the implications of fiscal and monetary policy, and the viability of US borrowing practices. The analysis discusses factors that contribute to sustained demand for the dollar. Notably, the research underscores the paradox of the USD's strength during periods of economic uncertainty, where it remains a preferred safe haven despite domestic challenges. However, the USD's supremacy is increasingly challenged by sharply rising national debt levels, raising concerns about fiscal consistency and borrowing costs. The paper examines the implications of these trends, including the potential for reduced demand for U.S. treasuries and the associated risks to debt sustainability. Ultimately, this paper introduces the USD Reserve Status Index as a quantitative method of the factors influencing the USD's role as a global reserve currency, offering insights into the challenges and opportunities that lie ahead.
Author Biography
Yurii Lypka, National University of Water and Environmental Engineering, Rivne
