Loss of confidence in the US dollar’s reserve currency status could trigger a collapse of the US Treasury market and international financial fragmentation. This column argues that hedging is a rational response to recent fluctuations in the US dollar, as investors look to insure against exchange rate risks. However, widespread hedging itself makes Treasuries less […]
To many, the US dollar depreciation following the ‘Liberation Day’ tariff announcement on 2 April 2025 defied conventional wisdom. However, open-macro models predict that the impact of tariffs on exchange rates depends on how trade partners respond. Accounting for retaliatory threats, this column explores the effects of tariffs on the US dollar by revisiting the […]
Against a backdrop of escalating geopolitical tensions and rapidly shifting global alliances, policymakers are advocating strategies such as ‘friendshoring’ to safeguard supply chain resilience. This column uses data on 700 US firms importing from 96 countries between 2007 and 2020 to show that US firms reduce imports from countries that become ideologically distant from the […]
Stephen Miran, Chair of the US Council of Economic Advisers, claims that we live in ‘the world of Triffin’, meaning that foreign official accumulation of dollars is driving US current account deficits. This column argues that over the past ten years US current account deficits have persisted while foreign official inflows into US investments have […]
