The very rapid expansion of the Euro-dollar market during the last decade and its present size have earned it a prominent position in international financial affairs. Although a variety of factors have figured in the market’s formation, the relative absence of governmental regulation and freedom from institutional rigidities have been the sine qua non for its existence and growth. Conversely, the broad international character of the market and the wide freedom under which it operates have added to the complexity of monetary policy decisions in many countries. This article explores some of the interaction of the Euro-dollar market with monetary policy variables in the United States, specifically bank reserves and credit availability, interest rates and interest rate policy, balance of payments and gold flows, and official foreign exchange operations. A Definition of Euro-dollars Euro-dollars are generally interest-bearing bank deposits, denominated in U.S. dollars, that are placed with banks outside the United States. Such deposits are created, for example, when a British exporter holding a dollar deposit at a bank in the United States transfers it to a foreign bank or branch of a U.S. bank in London. The ex
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