De-Dollarization of Central Bank Reserves in the World Economy: 2015–2025

The role of the U.S. dollar in central bank reserves is shrinking significatively world-wide. We identify three main reasons; first, U.S. and European financial sanctions, second, the U.S. inflation tax which reduces the real value of the USD, and third, the consequent dollar depreciation which increases the value of other reserve currencies and gold. We estimate several central banks’ diversification away from dollars, mostly towards gold, from 2015 to 2025. Our results suggest that these three factors explain the de-clining share of the dollar in reserves. As a consequence, the U.S. Treasury forgoes new seigniorage, the “exorbitant privilege” and inflation tax revenue.