Fragmentation Processes and Positions of the U.S. Dollar in the Global Monetary and Financial System

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The article discusses the development of fragmentation processes and changes in the position of the U.S. dollar in the global monetary and financial system. The article is divided into three main sections. The fi rst section provides indicators describing the positions of the U.S. dollar in the global monetary and fi nancial system. Based on the analysis of economic size of the EU, China and the United States the author emphasizes that the size of American economy is an important but not the only factor contributing to maintaining the U.S. dollar’s dominance in the global monetary and fi nancial system. Using econometric research methods, the author has compiled a long-term forecast for changes in the U.S. dollar’s share in the world’s official foreign exchange reserves. It has been scientifi cally proven that the dominance of the U.S. dollar in the global monetary and fi nancial system is mainly due to the accessibility and depth of the American fi nancial market. Scenarios for the future development of the global monetary and fi nancial system are proposed. The second section analyzes the risks associated with maintaining the U.S. dollar’s dominant position in the global monetary and fi nancial system. It has been found that negative spillovers from U.S. dollar appreciations fall disproportionately on emerging market economies when compared with advanced economies. The third section presents the principles for building a global fi nancial safety net. The article concludes that transition from the current global monetary and fi nancial system centered on the U.S. dollar to a more polycentric one would be very slow. Strengthening macro-fi nancial policy frameworks at the national level and ensuring the effective operation of the global financial safety net are proposed as ways to deal with external challenges in the context of the current global monetary and financial system.