Macroeconomic Indicators as Determinants of the U.S. Dollar as a Primary Reserve Currency

Several currencies have arisen as credible competitors for the dollar\u27s primary reserve currency position in central banks around the globe, and many wonder how long the dollar can maintain its position. Reserve currency usage is dependent relative to the size of the home economy, openness to trade, and prosperous and stable growth, including an inertial bias. This paper utilizes econometric methods to examine the significance of macroeconomic indicators of the U.S. dollar’s reserve currency status. The dataset is gathered from the IMF\u27s COFER database using a time period from 2000 to 2013 in order to capture the most relevant reserve levels post-euro adoption. The estimated coefficient values indicate a significant inertial bias. This result implies that we can expect the dollar to hold the primary reserve currency position for the near future