Why does the U.S. dollar remain supreme?

Despite predictions of decline, the US dollar retains its global supremacy. This dependence on the US currency, reinforced by economic cycles, has major repercussions on the global economy.

Research by Gianluca Benigno Professor of Economics at HEC Lausanne shows that when the U.S dollar gets stronger, for instance following interest rate increases by the U.S. Federal Reserve, this can lead to a decline in global economic activity, which in turn benefits the dollar itself, reinforcing its initial appreciation.

Despite a decline in the USA's share of global GDP, the use of the dollar has increased, still accounting for a significant share of world trade and international payments. This ramp up is supported by millions of daily decisions around the world, making it difficult to reduce dependence on the dollar.

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