One or multiple international currencies? Evidence from the history of the oil market
Livia Chiţu, Barry Eichengreen, Arnaud Mehl 17 March 2014
The dollar remains dominant in the global monetary system. The clearest sign for its prevailing status is the dollar’s role as an exclusive currency used in the global oil market. This column suggests that there is room for more than one international currency even in a market as homogenous as the oil one. This is consistent with the view that network increasing returns are not as strong as sometimes supposed, first-mover advantage is not everything, and incumbency is no guarantee for continued dominance.
Notwithstanding a near meltdown of the US financial system, the downgrade of US sovereign debt by one rating agency and the emergence of the renminbi as a potential rival, the global financial crisis underscored – in the view of many – how dominant the dollar remains in the global monetary system (see e.g. Frankel 2013, Prasad 2014).
Energy International finance
international currency, oil market
When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets
Barry Eichengreen, Arnaud Mehl, Livia Chiţu 23 May 2012
Conventional wisdom states that the dollar took over as the leading international currency after the Second World War. This column presents new evidence from the bond markets suggesting it was much earlier in the 1920s. This implies that inertia and lock-in effects in international currencies are not all they’re cracked up to be and that the shift to a multipolar currency system might happen sooner than commonly believed.
The global economic and financial crisis has lent new impetus to discussions of the future of the international monetary and financial system. Some advocate moving to a multipolar system in which the US dollar shares its international currency role with the euro, the Chinese renminbi and/or the IMF’s Special Drawing Rights. At the Cannes Summit of November 2011, G20 Leaders committed to taking “concrete steps” to ensure that the international monetary system reflects “the changing equilibrium and the emergence of new international currencies”.
dollar, international currency
Memory and the dollar
Rebecca Hellerstein, William Ryan 06 February 2010
Will the dollar lose its dominant role in international transactions? This column argues that this will happen quite slowly, if at all. It presents new evidence that in developing economies, demand for dollars hinges much more on historical factors than on recent experience. The highest inflation rate recorded within a country over the past 30 years explains flows of cash dollars more compellingly than recent inflation rates.
Since the Second World War, the dollar has been the currency used most commonly in financial, trade, and cash transactions worldwide. Whether that will remain the case is the subject of an intensifying debate in global financial circles. Already, the euro is counted as the dollar’s dominant challenger, while China’s central bank governor, among others, has suggested establishing an alternative (some might say, rival) “super-sovereign reserve currency.”
Exchange rates International finance Monetary policy
euro, dollar, international currency
Forecasting the euro’s future
Benjamin J. Cohen 13 September 2008
Jeffrey Frankel and others predict that the euro could surpass the dollar as the premier international currency relatively soon. This column argues that predictions borne of economic formalism unrealistically neglect the political forces shaping international currencies. Politics may ensure the dollar’s dominance for some time.
The upcoming tenth anniversary of Europe’s Economic and Monetary Union (EMU) has sparked much discussion over the future of the euro as an international currency. For many economists, it is only a matter of time until the euro overtakes America’s greenback. Jeffrey Frankel, for example, predicts that Europe’s joint money could surpass the dollar within as few as ten years. Is that realistic?
Politics and economics
euro, international currency, Political Economy
The euro could surpass the dollar within ten years
Jeffrey Frankel 18 March 2008
One of the world’s leading international economists explains how the euro could surpass the dollar as the premier international currency and examines the geopolitical implications of such a shift.
The International Economy recently asked experts: Ten years from now, which will likely be the next great global currency?
foreign exchange reserves, euro, deficits, dollar, international currency