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Global Currency Rivalry: Can the Euro Ever Challenge the Dollar?


I am indebted to David Andrews, Iain Begg, Randall Henning, and Thomas Willett for helpful comments.

Can the euro ever truly challenge the dollar? The purpose of this lecture is to explore prospects for the euro as an international currency. My assessment, which will disappoint many, is deeply skeptical. The euro will of course dominate monetary relations within the European region and may even extend its influence to some neighboring areas, such as the Mediterranean littoral or sub-Saharan Africa – what the European Central Bank, the ECB (2001), calls the "Euro-time zone." As Wyplosz remarks: "This is the euro’s turf" (1999: 89). But elsewhere, for the foreseeable future, Europe’s new money is fated to remain a distant second to the greenback, however much many Europeans would prefer otherwise.

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