The Eurodollar Market has drastically changed the world financial markets of today. The competitive effect of the international money market was the cause of almost all industrialized countries liberalization of domestic money and banking markets. Eurodollars are deposits denominated in US dollars at banks outside the United States, and they are not under the jurisdiction of the Federal Reserve. These deposits are subject to a lot less regulation than similar deposits that are made in the United States.  This allows for higher margins. There really is nothing European about the Eurodollar deposits. A Eurodollar deposit can be made in Tokyo or Caracas. There is also no connection with the euro currency, the term Eurodollar is only used for US dollar deposits in European banks.  The Eurodollar first came about in 1956 because of the cold war.  At first the Eurodollar was only in European nations but because of the large commercial deficits of the United States the Eurodollar Market quickly expanded worldwide.  Taking Eurodollar loans is most often more convenient than taking loans in the United States.  To exist, the Eurodollar Markets must also have liberal offshore banking regulations.  As long as the banks outside of the United States offer convenience and smaller spreads than the Eurodollar Market will continue to thrive. The growth of the Eurodollar Market is caused because of the restrictive US government policies.  These policies include reserve requirements on deposits, special charges and taxes, required concessionary loan rates, interest rate ceilings, and rules which restrict bank competition.  Yet the most important factor affecting the supply and demand of Eurodollars is the yearning of dollar depositors to receive the highest yield and the yearning of dollar borrowers to pay the lowest cost.