Financial sanctions and the share of US dollar in global reserve currencies: evidence from the Least Absolute Shrinkage and Selection Operator (LASSO) model

The decline in the dollar's share in global reserve currencies has generated debate on the effect of the United States' financial sanctions.This study examines the effect of US financial sanctions on the dollar's share in global reserve currencies by employing the Least Absolute Shrinkage and Selector Operator (LASSO) model.The estimates suggest that the imposition of financial sanctions by the US reduces the dollar's share in global reserve currencies.This implies that although the US dollar remains the foremost global reserve currency, the imposition of financial sanctions may weaken its dominance.