Author/s: Rogelio Mercado

In 2019, half of Asia’s external assets and a quarter of the region’s external liabilities were denominated in US dollar, suggesting the dominance of US dollar in Asia’s international investments. Existing studies have identified potential factors explaining the dominance of US dollar in international finance. These include dominance of the US dollar in trade invoicing, size of the US economy, depth of US financial system, role of the Federal Reserve, among others. Yet, few empirical studies were conducted in examining the relevance of these factors. This paper aims to provide empirical evidence assessing the significance of these factors in explaining the dominance of US dollar in Asia’s external assets and liabilities.

JEL codes: F31, F36, F41