In its 2009 Report to Congress on International Economic and Exchange Rate Policies, the US Treasury provided a historical perspective on the reserve currency status of the dollar and identified six key factors that are commonly attributed to supporting the use of a currency as a reserve. The GeoEconomics Center built on this framework by identifying specific indicators to compare the selected currencies’ performance in each criterion over time. The more a country fulfills a criterion, the darker its circle is shaded  (for example, a better credit rating for a countries’ sovereign debt will translate to a darker circle, a lower rating will translate to a lighter shade).

  • A sizable domestic economy: We use data from the IMF’s World Economic Outlook Databases to obtain the GDP at current prices of the issuer of the given currency and for the global economy. We then use this data to calculate the country’s share of global GDP.
  • The importance of the economy in international trade: We use the World Bank’s data on exports and imports for the issuer of a given currency. We sum the latest available data for the country’s exports and imports, divided by the sum of total world exports and imports for that year. 2022 data is used for all countries except the United States and Japan, for whom we use 2021 data due to availability. We use extra-Euro Area trade data (does not include trade within the Euro Area) from Eurostat.
  • The size, depth, and openness of financial markets: We use the Financial Markets Index, which is a component of the IMF’s Financial Development Index, for the issuer of the given currency. The Financial Markets Index takes into consideration the depth, access, and efficiency of financial markets in the country. More information on the Financial Markets Index can be found here. For the Euro Area, we took an average of member countries, weighted by their GDP. The Index is missing data for the Netherlands, Slovakia, and Slovenia.
  • The convertibility of the currency: We use the Chinn-Ito Index developed by researchers Menzie Chinn and Hiro Ito to measure the degree of capital account openness of the given currency’s issuing country. The index is a de jure measure of financial openness. The database is based on the tabulation of restrictions on cross-border financial transactions reported in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER). More information on the index can be found here.
  • The use of the currency as a currency peg: We use data from recent research by Ethan Ilzetzki, Carmen Reinhart, and Ken Rogoff who developed a database identifying the de-facto anchor currency for 194 countries where relevant. Their methodology takes into account foreign exchange intervention, reserve holdings, pricing practices and responses to extreme shocks for this identification. More information on their database can be found here. We use this data along with data from the IMF’s World Economic Outlook to calculate the share of global GDP that is anchored to a given currency.
  • Stable domestic macroeconomic conditions and policies: We use S&P Global Ratings’ credit ratings for long-term local currency bonds issued by the issuer of the given currency. Macroeconomic conditions and policies are a key factor of these credit ratings.