Exorbitant privilege definition
Exorbitant privilege means the advantage of the emitter of the key and reserve currency to incur debts abroad at low interest rates, since the demand for bonds in the respective currency is quite high. At the same time, assets abroad yield high returns, because the high demand for the reserve currency results in higher interest payments. Another advantage for the key currency country is high money creation profit, since the amount of money in circulation is over-proportionally high.