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← The Case for and Against Dollar Dominance
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Question
What is Eichengreen's "network effects" argument for dollar durability?
1
The dollar is backed by the largest economy and the strongest military, making network effects irrelevant
2
Network effects in financial markets always favour the incumbent, and the dollar has been incumbent since 1945
3
The dollar's network effect derives specifically from oil pricing, which cannot change without Saudi Arabia's agreement
4
Reserve currencies are self-reinforcing because everyone accepts them because everyone else does — switching requires coordinated action by all participants simultaneously
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