Abstract
The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and government bonds, bank loans, and import and export invoices. These currencies offer unrivaled liquidity, constituting large shares of the volume on global foreign exchange markets, and are commonly chosen as the anchors targeted by countries with pegged or managed exchange rate regimes. From its launch in 1999, the euro’s global use steadily grew and, by the mid 2000s, it had cemented its status — together with the dollar — as a key international currency. Maggiori, Neiman, and Schreger (2018), however, demonstrate a surge in the use of the dollar and collapse in the use of the euro to denominate internationally traded corporate and sovereign bonds starting roughly around the time of the global financial crisis. In this article, we provide evidence suggesting that this rise of the dollar and fall of the euro might be more pervasive, with similar patterns manifesting across most aspects of international currency use.