The international currency system revisited

Abstract

What does the international currency system really look like? Since World War II, the US dollar has prevailed as the international community’s one truly global money. The currency system could loosely be described as unipolar, practically a monopoly. Is that still true? Opinions are sharply divided. Close to a decade ago the authors sought to resolve the issue with a detailed empirical analysis stretching back over a quarter of a century. Their conclusion was that loose talk of an increasingly multipolar currency system was at best premature. In reality, they could find few signs of significant change in the competitive structure of the system over the years under review. While acknowledging that a future of multipolarity could yet arrive, they saw no evidence that anything like that had happened yet. The aim of this paper is to extend the authors’ previous analysis forward to encompass another decade. Their conclusion, overall, remains much the same as before. Despite some hints of minor erosion, the dollar remains as dominant as ever. A cluster of smaller currencies have begun to compete for attention, but multipolarity in any meaningful sense has still not arrived. The greenback still reigns supreme.