Business Case Studies & Business Publications

Global Asset Allocation: Whither the U.S...

Warnock, Francis E...

Case

Global Asset Allocation: Whither the U.S. Dollar?

Warnock, Francis E.; Chandler, Marc

F-1591 | Published June 16, 2009 | 28 pages Case

Collection: Darden School of Business

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Fully updated through end-2016, this case is an in-depth study of long-run issues facing the U.S. dollar. Couched in terms of a pension fund manager having to make an international asset allocation decision that requires a 5- to 10-year view on the path of the U.S. dollar, it allows students to debate important factors such as the likely adjustment of private U.S. investors' international portfolios, central bank diversification away from the dollar, the end of the dollar as the world's reserve currency, the internationalization of the yuan, and the dollar's level versus longer-term fair value. The case also includes a lengthy description of international monetary arrangements, including the gold standard.

The case provides students with an opportunity to discuss various medium- to long-term drivers of the U.S. dollar's exchange value, including the dollar's status as the global reserve currency and, related to that, central banks' potential diversification out of the dollar as well as the internationalization of the Chinese yuan; U.S. investors' global positions; purchasing power parity; and potential G7 intervention. The case also includes a lengthy description of international monetary arrangements, including the gold standard.