Predicted shares are computed under two scenarios: (i) using estimates from a model restricted to standard economic determinants of international currency choice (shown as yellow bars); and (ii) using estimates from a model expanded to include the effect on international currency choice of the countries’ NATO membership (shown as red bars). Actual US dollar shares are shown as blue bars.
In fact, a lot of the work needed to keep inflation on a reasonable track was done in the period from 2002 to 2005, when unusually low interest rates, which had been appropriate for the earlier part of the decade, were gradually lifted towards normal. They were raised a bit further, to be slightly higher than normal, during 2006.