ABSTRACT
This chapter estimates the direct effects of the dollar's roles on the US balance of payments, and completes the analysis of the direct effects of the international roles of the dollar on the US economy. The international roles of the dollar have several direct effects on the US economy. The existence of a large volume of dollars held outside the country influences monetary conditions in the United States. The earnings of numerous US banks and firms are affected by the external roles of the dollar, which thus alter national income. A direct effect of the international roles of the dollar on the US economy operates through its effect on private US banks and corporations. It is often claimed that the United States extracts "seigniorage" from the international roles of the dollar. The interest differential between foreign interest-bearing deposits in US banks and loans to foreigners by those banks is normally about one percentage point.
