Reserve Currencies in an Evolving International Monetary System
Departmental Papers, November 17, 2020
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- Reserve Currencies in an Evolving International Monetary System
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Bibliographic details
- Authors: Alina Iancu, Gareth Anderson, Sakai Ando, Ethan Boswell, Andrea Gamba, Shushanik Hakobyan, Lusine Lusinyan, Neil Meads, Yiqun Wu
- Published: November 17, 2020
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9781513560298.087
Summary findings
- Despite major structural shifts in the international monetary system over the past six decades, the US dollar remains the dominant international reserve currency.
- Using a newly compiled database of individual economies’ reserve holdings by currency, the paper finds that financial links have been an increasingly important driver of reserve currency configurations since the global financial crisis, particularly for emerging market and developing economies.
- The paper finds a rise in inertial effects, implying that the US dollar dominance is likely to endure.
- Historical precedents of sudden changes suggest that new developments, such as the emergence of digital currencies and new payments ecosystems, could accelerate the transition to a new landscape of reserve currencies.
Data and methods (as described)
- A newly compiled database of individual economies’ reserve holdings by currency was used to assess reserve currency configurations and drivers.
Implications and considerations
- Persistence factors: Increased inertial effects point to continued US dollar dominance in the near to medium term.
- Structural shifts: Financial linkages have become a more important determinant of reserve configurations since the global financial crisis, with pronounced effects for emerging market and developing economies.
- Potential accelerants of change: Digital currencies and new payments ecosystems are identified as developments that could accelerate a transition to a different reserve currency landscape, despite current inertia.
Content in this bundle
- Dataset overview
- Executive Summary