Honors Theses
Date of Award
Spring 5-13-2026
Document Type
Undergraduate Thesis
Department
Economics
First Advisor
John Conlon
Second Advisor
Rohan Shah
Third Advisor
Ji Hoon Hwang
Relational Format
application/pdf
Abstract
This paper constructs a unified annual time series of the major measurable components of the United States' exorbitant privilege from 1976 to 2024. Drawing on established econometric estimates from the literature, it measures three channels through which the international role of the dollar generates financial benefits for the United States: seigniorage from foreign holdings of physical currency, borrowing cost savings on federal debt arising from reserve-driven demand for Treasuries, and the return differential on the U.S. external balance sheet, covering both public and private holdings. All dollar figures are reported in real 2024 dollars, deflated by the Consumer Price Index. Expressed in comparable units and assembled from consistent public data sources, the estimates suggest the combined privilege averaged roughly 1.5 percent of GDP over the full period, growing from approximately $166 billion per year in the late 1970s to over $580 billion per year by the late 2010s, before declining to approximately $293 billion in 2024 as net investment income turned negative. The growth as a share of GDP is more modest—from approximately 1.3 percent in 1976–1989 to a peak of 2.19 percent in 2008–2019, before declining to 1.70 percent in 2020–2024. The growth in dollar magnitude is driven primarily by the expansion of the federal debt stock rather than by widening yield advantages. Recent evidence from the Covered Interest Parity (CIP)-adjusted Treasury premium and swap-implied convenience yields suggests that the privilege may be eroding at the margin, even as its dollar value reaches historical highs. The paper does not introduce new econometric methods but instead synthesizes existing approaches to produce a consistent cross-channel accounting that, to the author's knowledge, has not previously been assembled in one place.
Recommended Citation
Weeks, Carson T., "Measuring the Exorbitant Privilege: A Unified Estimate of the Financial Benefits of Dollar Dominance, 1976–2024" (2026). Honors Theses. 3558.
https://egrove.olemiss.edu/hon_thesis/3558