How many dollars are abroad?

If you divide the amount of US dollars in circulation by the number of people living in the United States, you get an amount in the order of $3000. This is quite stunning, yet could be explained by various factors: money held in freezers and mattresses, money held by businesses, money used in the underground economy, lost money, and money held abroad. The latter is usually thought to make the bulk of it, given the status of the US dollar as an international reserve currency and its use as a parallel currency in several countries (if not full dollarization).

Edgar Feige thinks that in facts less than a quarter is abroad, but there is considerable uncertainty. For one, confidential data about dollar movements abroad has been made public, and official estimates need to be revised down. Also, indirect methods used to estimate this share seems to deeply flawed and very sensitive to their assumptions. But, somehow, it is still noticeable that the demand for dollars abroad declined with the emergence of the Euro as a viable alternative. One consequence of all this uncertainty and likely downward revision is that estimates on the size of the shadow economy that rely on money demand are wrong as well, something I actually complained about recently.