IMF Working Papers

Currency Usage for Cross Border Payments

By Hector Perez-Saiz, Longmei Zhang, Roshan Iyer

March 24, 2023

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Hector Perez-Saiz, Longmei Zhang, and Roshan Iyer. Currency Usage for Cross Border Payments, (USA: International Monetary Fund, 2023) accessed October 13, 2024

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Summary

While the global usage of currencies other than the U.S. dollar and the euro for cross-border payments remains limited, rapid technological (e.g. digital money) or geopolitical changes could accelerate a regime shift into a multipolar or more fragmented international monetary system. Using the rich Swift database of cross-border payments, we empirically estimate the importance of legal tender status, geopolitical distance, and other variables vis-à-vis the large inertia effects for currency usage, and perform several forecasting simulations to better understand the role of these variables in shaping the future payments landscape. While our results suggest a substantially more fragmented international monetary system would be unlikely in the short and medium term, the impact of new technologies remains highly uncertain, and much more rapid geopolitical developments than expected could accelerate the transformation of the international monetary system towards multipolarity.

Keywords: Cross border payments, Currency dominance, International monetary system (IMS), Legal tender, Swift

Publication Details

  • Pages:

    28

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/072

  • Stock No:

    WPIEA2023072

  • ISBN:

    9798400235375

  • ISSN:

    1018-5941