Quotation Breuss, Fritz, Roeger, Werner, in't Veld, Jan. 2008. Global Impact of a Shift in Foreign Reserves to Euros. Annual Meeting of the Austrian Economic Association NOeG 2008, Wien, Österreich, 23.05.-24.05.2008.


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Abstract

This paper uses QUEST III, a multi-region global DSGE model, to study the effects of a gradual equalization of the portfolio composition of official foreign reserves between dollars and euros. We simulate a scenario of a shift in the composition of foreign reserves holdings from the present ratio of 65 percent dollars and 25 percent euros to equal 45 percent shares over a 10 years period. Technically, the shift is simulated as a shock to money demand and the balances of payments to account for higher demand for euros. Our simulations point towards small real effects (an increase of real GDP in the euro area by up to 0.4 percent) of such a shift in holdings due to sizable gains (losses) in consumption in the euro area (United States) resulting from the wealth effect. However, the shift leads to an appreciation of the euro of around 5 percent while the trade balance deteriorates by up to 0.4 percent of GDP. The effects for the United States are the mirror image of this.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Global Impact of a Shift in Foreign Reserves to Euros
Event Annual Meeting of the Austrian Economic Association NOeG 2008
Year 2008
Date 23.05.-24.05.2008
Country Austria
Location Wien
URL http://www.wu-wien.ac.at/europainstitut/noeg

Associations

People
Breuss, Fritz (Details)
External
in't Veld, Jan (European Commission DG ECFIN, Belgium)
Roeger, Werner (European Commission DG ECFIN, Belgium)
Organization
Institute for International Economics IN (Details)
Europainstitut (Badinger) (Former organization)
Research areas (ÖSTAT Classification 'Statistik Austria')
5115 European integration (Details)
5300 Economics (Details)
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