Dominant currency debt

We propose a “debt view” to explain the dominant international role of dollar. Within simple capital-structure model with debt-currency choice, we show that “dominant currency” is one (1) depreciates in global downturns over horizons typical debt maturity and (2) has steepest nominal yield curve. Empirically, dollar fits this description better than other major currencies. The view can dollar-debt-issuance patterns past two decades. It also offers insights into future dominance aftermath COVID-19 crisis.