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Euro vs dollar Will the euro replace the dollar as the world currency?

Will and should the euro become an international currency? Previous work has noted that measuring size by GDP, role in international trade or even financial markets, Europe matches the USA. On these grounds, the euro is expected to challenge the dollar's supremacy. Cost-benefit analyses have looked at seigniorage, benefits for home financial institutions, relaxation of the external constraint, influence on international institutions, effects on macroeconomic policy co-ordination, and the wider consequences of exercising or sharing ‘currency hegemony’. This paper revisits these issues with a new framework that stresses the role of financial asset markets and uses new data to evaluate scenarios. As euro securities markets become deeper and more liquid and transaction costs fall, euro assets will become more attractive, and the use of …