Reform Of Monetary System Research Articles

US Dollar Dominance in International Trade and the Impact of Trump’s Policies

This paper delves into the status of the US dollar as a world reserve currency and its profound impact on China's economy. It emphasizes the significance of capital account convertibility for governments and advocates the necessity for reform in the international monetary system. The study sheds light on China's remarkable economic growth and its reliance on the US dollar, while also exploring the emergence of an alternative currency basket featuring the Chinese yuan (RMB). With the gradual depreciation of the US dollar on the horizon, the potential consequences for China's economy are thoroughly examined.Additionally, the paper addresses the risks associated with de-dollarization and the potential flight of USD-denominated debt to alternative assets like gold. A detailed analysis of how Trump's economic policies, especially the trade war with China, have impacted the global role of the US dollar is presented. Furthermore, the paper provides a comprehensive historical review of the international monetary system, spanning from the gold standard to the Bretton Woods system and the Jamaican system. It critically discusses the flaws and instability inherent in the current system, including issues related to currency over-issuance and the multi-currency reserve system.In conclusion, the paper examines the policy signals of the Federal Reserve and the US Treasury, along with the ramifications of Trump's economic policies on the US dollar and the global economy. The findings underscore the urgent need for measures to address the challenges posed by the current monetary system and its potential impact on China's economy. The study advocates for a proactive approach to international monetary system reform to ensure economic stability, promote balanced global economic growth, and address the complexities arising from the dominant status of the US dollar as a world reserve currency.

RATIONALITY OF HOLDING US DOLLAR ASSETS BASED ON GLOBAL US DOLLAR LIQUIDITY STRUCTURAL TRANSFORMATION: A NEW PERSPECTIVE ON ASSET ALLOCATION

ABSTRACT As a crucial share of global liquidity, USD liquidity heightens a prominent negative spillover effect within the international monetary system. Especially, against the turbulent world background after the 2020 pandemic and the Russo-Ukrainian War, it is more observable to intensify the negative spillovers of USD liquidity during bad times. US Treasury securities, which greatly contribute to the USD liquidity externality because of their safety and reliability, have long been preferred by the world’s main economies. Moreover, the yield of US Treasury securities can be an important factor determining the USD liquidity spillover and is a key consideration in evaluations of the international monetary system. Considering the dilemma USD assets holders are faced with, we dig into the spillover effect at the macro-economic level and extend this mechanism into asset allocation effectiveness at the micro-economic level. Our investigation results point to a significantly negative relationship between the effect and risk level of USD assets on the one hand and the scale of USD foreign exchange reserves on the other. This implies that the world’s main economies face more challenges regards to international liquidity management, lacking a feasible plan for replacing USD assets. We contend that reform and diversification are needed in the current USD standard monetary system to strengthen the effect of global liquidity. Keywords negative externality of USD liquidity, US Treasury securities, asset allocation, monetary system reform, turbulence

The International Monetary System Reform: Refusal to Use the Dollar and Fair Exchange Rate

The purpose of the study is to develop recommendations aimed at eliminating shortcomings of the modern international monetary system. The author suggests a draft of its reform. The draft provides, firstly, an objective reflection of the economic state of the issuing state in compliance with the exchange rate of the national currency and, secondly, allows eliminating disproportionate use of the US dollar in international trade. When developing the draft of the reform, the author proceeded from the assumption that the reform of the international monetary system based on consensus is impossible: «beneficiaries of the modern monetary order» will actively defend their national interests to the detriment of the interests of the majority of members of the international community. Under the current conditions, the only way to transform the international monetary system is to take unilateral actions of individual States. At the same time, the «engine of the reform» should include the commercial benefit of private participants of foreign economic activity: it is unrealistic to adjust the international monetary system by establishing new rules that do not ensure additional (at least minimal) profit for international trade agents. Based on these prerequisites, the author formulates a model of unilateral modernization of the settlement system and the system of customs and tariff regulation when importing goods that can be applied by an individual state. Implementation of this model should generate demand on the domestic foreign exchange market for the national currency of the importing state proportional to its share in international trade. A consistent increase in the number of states using this model will allow, based on market principles, creating a new international monetary system, eliminating its main drawbacks, including reducing the role of the US dollar in international trade to an adequate value reflecting the current state of the American economy. The author relied in the study on analytical and statistical methods, the method of economic and legal modeling.

Digital Currencies and Relevant Policy Analysis

The paper collates the relations of digital currencies with the past forms of currencies, studies the operating mechanism of digital currencies, analyzes the influence of digital currencies on the financial order and economic pattern, and probes into how to drive the reform of global monetary system with pragmatic and innovative efforts. The paper highlights: First, the evolution and development of currency reflects the mankind’s social and economic development level. Second, digital currency born with the advances of technology does not change the content of credit money. The credit money-to-digital currency shift must respect the operating mechanism of money and ensure that the physical market and the money market are balanced or roughly balanced. Third, with a complicated influence on the social economy, digital currency is unlikely to change the global monetary system and the international economic pattern easily. Fourth, the work of encouraging financial innovation and improving overall financial infrastructure should come with strengthened efforts to develop sound rules governing the market order in the context of digital economy, by guarding against the risks from “excessive monopoly” and “decentralization”. Fifth, the paper calls for linking “trust, confidence and credit” of the human society organically with such intrinsic values as global development, global planning and global resources, and also leveraging such values to actively approach the “Earth-based” monetary system and its replacement of the “gold standard”, the “silver standard” and the sovereign credit based monetary system which have been in long use.

Towards Rivalry or Concert? A China–US Financial Competition Triumvirate

Abstract Given the pivotal role of finance in interstate relations as a prominent source of international power, China–US financial competition, or even confrontation, could be more intense and devastating than trade conflict. It hence merits greater policy and academic attention and communication between the two states. This article takes stock of a triumvirate of Chinese views regarding China’s financial rise and potential China–US financial competition that has empirical and epistemological dimensions. Empirically, it signifies three major issue areas: Renminbi (RMB) strategies and dollar hegemony; the China–US financial imbalance and debt relations; and US dominance of global financial governance and ‘Zhongguo Fangan’—Chinese Solutions. RMB strategies to break dollar hegemony include a further three areas: International Monetary System reform; RMB internationalisation; and financial opening-up. Epistemologically, the empirical analyses present a triumvirate of embedded and interweaved angles: normative and universal; technical and micro level; and power and nationalist. Based on a triumvirate of perspectives, it argues that China’s financial rise is variously limited in relevant fields, and that China–US financial competition also varies according to different issue areas associated with different financial powers, and thus calls for a reductionist, field-specific, and pluralistic approach to managing China–US financial competition.

The emergence and development of financial legal relations in the Ancient Russian State with the center in Novgorod, then in Kiev and finally in Moscow (Series of articles) Financial and legal relations in the Ancient Russian State with the center in Kiev

The article analyzes the emergence and development of financial relations in the Grand Duchy of Kiev, taking into account the experience of the Novgorod state, but especially of Byzantium. The article examines the monetary system of the Principality of Kiev, the formation of a civilized monetary system, monetary circulation, and tax reform of Princess Olga.

Scenario Analysis of the Russian Forex Market Development Strategies

The subject of the research is the foresight into development strategies of the foreign exchange sector of the Russian financial market under the new geo-economic conditions and in the context of the international monetary system reform and sanctions on Russian transactions in the international financial market. The relevance of the problem is caused by the ruble volatility and strong fluctuations in the values of macroeconomic variables after 2014. The purpose of the research was to develop a scenario model for the development of the Russian forex market for the next three years based on three scenario forecasts: optimistic, pessimistic and conservative. A scenario model of the Russian foreign exchange market development was built by superimposing scenarios of the national economy development on the forex market development scenarios along with assessment of the possible impact of the forex market development on other national financial market segments. The model is based on international macroeconomic variables statistics, the state of Russia’s payment balance and also on a comparative analysis of the development indices of national economies of raw materials exporting countries and the national economy of Russia. For data aggregation and reduction to a single format, an information-logical model for formation of the research information base was developed. The obtained scenario model for the development of the Russian financial market forex sector has a high predictive capability. The paper concludes that, based on the scenario model, the forex sector of the Russian financial market will be fairly stable over the next three years, which should be taken into account by the Bank of Russia when making decisions on the forex policy and creation of international currency reserves.

The Determination of Money: A comparative analysis of Zakat (Alms) and Income Tax payers among selected ASEAN countries

AbstractPurpose: The objective of this study is to provide a solution for ASEAN countries regarding zakat and income tax under Islamic monetary system. When the alms payer spend their alms, they don’t need to pay income tax because they have to deduct already their amount through one channel only.Design/Method: This study based on qualitative measurement technique and includes several constitution acts regarding zakat (alms) payer and income tax acts. This study builds a notion to make the alms as the subtrahend of income tax so it could minimize the burden for those who are obliged to pay both of the tax and alms, where it will lead to a positive impact in terms of increase the number of alms payer and tax payer.Results: The result of these alms are distributed among eight categories set in Quran in order to decrease poverty and boost economic growth in particular countries. The alms payer are disputatively increase then the society will feel welfare of the distributed result of alms to the people. Moreover, everyone has more money to pay taxes especially those belong from low incomes, whose earnings have to be cut again by the income tax paid, which doesn’t mention the religious absolute obligation to pay zakat mal.Originality of Work: The study investigates a comparative analysis between two different deduction systems on income. Furthermore, this study also helps policy makers for real implication of alms in the country and creates reform of monetary system for financial institutions.

Rola SDR w perspektywie zmian zasad funkcjonowania międzynarodowego systemu walutowego

Rozwój dyskusji wskazującej na potrzebę podniesienia efektywności międzynarodowego systemu walutowego sprawia, że pojawia się wiele propozycji jego reformy. Z przedstawianych w literaturze koncepcji modyfikacji międzynarodowego systemu walutowego wyłaniają się dwa główne stanowiska: 1) przejście w kierunku systemu wielodewizowego oraz 2) stworzenie globalnego systemu walutowego przez oparcie go na Specjalnych Prawach Ciągnienia (SDR) lub wykreowanie ponadnarodowego pieniądza papierowego. Te okoliczności są przesłanką do podjęcia badań, których celem jest analiza wykorzystania SDR w funkcjach waluty międzynarodowej oraz ocena możliwości reformy międzynarodowego systemu walutowego, polegającej na zwiększeniu roli SDR. Z przeprowadzonych badań wynika, że przejęcie przez SDR funkcji waluty międzynarodowej jest możliwe, jednak wymaga istotnych zmian w polityce krajów oraz stworzenia warunków do szerszego zastosowania SDR, zarówno w sferze transakcji oficjalnych, jak i prywatnych. Zastosowane metody badawcze obejmują studium literatury przedmiotu oraz analizę danych statystycznych, głównie IMF i UNCTAD.

Development of the International Monetary System Conditions of Globalization

This paper outlines the modern trends in the development of the international monetary system in conditions of financial globalization.The paper establishes that the international monetary system has evolved through different stages necessitated by various economic crises at different periodic intervals. It is noted in the paper that despite the inefficiencies in the current dollar denominated international monetary system developed countries are reluctant to do any reforms.However, International monetary system reform is obvious and most likely will happen under the growing crisis in the international financial systems and credit relations. It is proposed that countries look at new innovations that will make international transactions cheaper and less risky.

A reform-minded status quo power? China, the G20, and reform of the international financial system

This paper analyses the case of China in the G20 process and examines China’s position and policies on relevant issues, including international monetary system reform, reform of the international financial institutions (IFIs), international financial regulation, the future of the dollar, and internationalisation of the renminbi. My findings demonstrate that China has actively participated in the G20’s deliberations and actions, put forward its suggestions, sought an expanded share and voting power in the IFIs in correspondence with its rising status, and promoted the internationalisation of the renminbi. It does not aspire to overthrow this system within which it has prospered. In this sense China is a status quo power. Meanwhile China argues that the current international order is flawed and that there exist a number of unjust and unreasonable components. They have long needed to be changed. My conclusion is that China is not a complete but rather a reform-minded status quo power.

The International Monetary System and the Available International Policy Options for Emerging Countries

This paper discusses how the available international monetary policy options for emerging countries changed over time during the post-Bretton Woods era in view of the trilemma. Upon the liberalization of the emerging countries' capital account, emerging countries suffered from excess volatility and economic crisis. They piled up reserves to survive in the region of free international capital mobility, but further reserve accumulation might not be sustainable in the future. Preventing the negative consequences of highly volatile international capital flows by providing global liquidity properly will dictate the available policy combinations for emerging countries. A fundamental reform on the international monetary and global liquidity provision systems will assist emerging countries in coping with liberalized capital accounts. However, the implementation of such a reform will take a long time. In this case, properly developed financial safety nets may help emerging countries in the interim. Otherwise, emerging countries have no choice but to impose capital controls. Advanced countries should understand the emerging countries' options and strive with these countries to implement an international monetary system reform that can reflect the recent worldwide developments.Keywords: Post-Bretton Woods system, Capital controls, International monetary system, Reform, Financial safety nets, Trilemma, Emerging countries, International capital mobility, Reserve hoarding, Global liquidity provisionJEL Classification: F33, F38, F42, F55I. IntroductionMore than 40 years had passed since the collapse of the Bretton Woods system. Since then, the post-Bretton Woods system had faced various challenges. The imbalanced trade among the United States, Japan, and Germany led to the Plaza agreement. Many emerging countries suffered from economic crises after liberalizing their capital accounts. To prevent another economic crisis, these countries piled up huge amounts of foreign exchange reserves, and this action caused a big international controversy. The recent global financial crisis, which occurred with the global imbalances, generated debates on international monetary system reform.The international monetary system limits a set of available international monetary policy options for each country. The exchange rate was fixed under the Bretton Woods system, which prompted the need to limit the international capital mobility to obtain monetary autonomy in view of the trilemma. The available policy options for each country change along with the economic environment. If the capital account is liberalized under a fixed exchange rate system, each country has to give up its monetary autonomy in view of the Trilemma.The post-Bretton Woods system imposed new restrictions on each country's available policy options. Emerging countries experienced substantial changes in their economy and in their available policy options after the collapse of the Bretton Woods system. Moreover, as emerging countries grew fast, their economic actions started to affect other countries and the entire system.This study discusses how available international monetary policy options for emerging countries changed over time during the post-Bretton Woods era in view of the trilemma. The available policy options for emerging countries changed along with their economic environment, and this occurrence increased the need for the reform of the international monetary system. After summarizing the current progress in the international monetary system reform, this study suggests that the evolution of the international monetary system will have an important implication on the available policy options of emerging countries.Section II explains the trilemma and the post-Bretton Woods system. Section III discusses how the changes in the economic environments affected the available policy options for emerging countries. Section IV summarizes the current progress in the international monetary system reform. …

Regional Settlement Infrastructure and Currency Internationalization: The Case of Asia and the Renminbi

The squeeze in United States dollar liquidity that emerged with the global financial crisis highlighted the risks inherent in the current global financial system. Asia was adversely affected by the crisis not only because of its dependence on trade, but also because of its heavy reliance on the US dollar for regional and international transactions. As Asia’s role in the global economy continues to expand, its dependence on the US dollar is bound to increase, raising further its vulnerability to future liquidity shocks. The use of regional currencies for bilateral trade settlement could reduce such vulnerability. As demonstrated by the renminbi trade settlement scheme piloted between the People’s Republic of China; Hong Kong, China; and Macao, China, the existence of appropriate financial infrastructure could reduce the relatively larger costs of bilateral currency transactions compared with triangular transactions through the United States dollar. As most central banks are securities depositories of government bonds, combining trade settlement with government bond securities settlement could also have large synergy effects without substantial extra costs. This proposal does not require full liberalization of the capital account or full deregulation of capital markets, and is more politically feasible in transition. As such, extending the trade settlement scheme to the rest of Asia and appending a government bond payment and securities settlement system could be a practical solution to international monetary system reform and the diversification of settlement currencies.

The Institutional Supply of China’s Participation in the International Monetary System Reform

There exist dual features of internationalization and regionalization in the current international monetary system, and the U.S. dollar is still in a dominant position in the system. A lack of relevant institutional constraints has led to institutional deficiencies and systematic risks in the international monetary system, and resulted in the frequent financial crises in the world in recent years. As an emerging economy closely related to the current international monetary system, China has responsibilities and obligations to participate actively in international monetary system reform and push forward international monetary system reform through institutional supply.

Bringing Them All Back Home? Dollar Diminution and U.S. Power

U.S. power is facing new macroeconomic constraints. They derive from a basic and generally underappreciated shift in U.S. engagement with the global macroeconomic order, which also complicates inte...

A Practical Approach to International Monetary System Reform: Building Settlement Infrastructure for Regional Currencies

The squeeze in US dollar liquidity that emerged with the global financial crisis highlighted the risks associated with the current global financial system. Asia was adversely affected by the crisis not only because of its dependence on trade, but also because of its heavy reliance on the US dollar for regional and international transactions. As Asia’s role in the global economy expands further, its dependence on the US dollar is bound to increase, raising even more its vulnerability to future liquidity shocks. The use of regional currencies for bilateral trade settlement could reduce such vulnerability. As demonstrated by the renminbi trade settlement scheme piloted between the People’s Republic of China and Hong Kong, China, the existence of appropriate financial infrastructure could reduce the relatively larger costs of bilateral currency transactions compared with triangular transactions through the US dollar. As most central banks are securities depositories of government bonds, combining trade settlement with government bond securities settlement can also have large synergy effects without much extra costs. This proposal does not require full liberalization of the capital account or full deregulation of capital markets, and is more politically feasible in transition. As such, extending the trade settlement scheme to the rest of Asia and appending a government bond payment and securities settlement system could be a practical solution to international monetary system reform and the diversification of settlement currencies.

The Global Move into the Zero Interest Rate and High Debt Trap

The paper identifies based on the monetary overinvestment (malinvestment) theories by Wicksell (1898), Mises (1912) and Hayek (1929) monetary policy mistakes in large industrial countries issuing international currencies. It its argued that a benign neglect towards monetary policy reform in a world dominated by financial markets has led to a erosion of the allocation and signaling function of the interest rate, which has triggered an excessive rise of government debt and structural distortions in the world economy. The backlash of high government debt levels on monetary policy making is argued to lead to the hysteresis of low interest rates and high government debt levels. In this context, monetary reform is discussed with respect to the exit from low interest rates and high debt policies and a reform of the prevalent world monetary system. It is concluded that enhanced competition between dollar and euro as international currencies, which is refereed by East Asia, can be a promising approach towards a more stable world monetary system.

A Reform-Minded Status Quo Power? China, the G20, and Changes in the International Monetary System

This paper analyzes the case of China in the G20 process and examines China's position and policies on relevant issues, including the international monetary system (IMS) reform, reform of the IFIs, international financial regulation, the future of the dollar, and internationalization of the Renminbi. My findings demonstrate that China has actively participated in the G20's deliberations and actions, put forward its suggestions, sought expanded share and voting power in the IFIs in correspondence with its rising status, and promoted the internationalization of the Renminbi. While having accepted and observed the current international rules of the game, China seeks changes for greater institutional power and for better global governance. I come to the conclusion that China is a status quo power which at the same time is hoping for constructive changes in the existing international order, and is thus a reform-minded status quo power.

Global Economic Governance Reform and the Role of Asia: Opportunities Offered by the G20

Global Economic Governance Reform and the Role of Asia: Opportunities Offered by the G20-Asia’s role in global economic governance, The G20 and global economic governance, International monetary system reform

Fritz Machlup and the Bellagio Group: Strategy and Organization in an Early NGO

Economist Fritz Machlup, the mentor and teacher of Edith Penrose, applied an opportunity cost-focused approach to the strategy and organization of his NGO for world monetary system reform. The NGO was the Bellagio Group, formed by Machlup and partners Robert Triffin and William Fellner to understand and solve the problems facing the world monetary system from the late 1950s through the 1970s. This story has been largely untold. This paper examines Fritz Machlup’s intellectual background, his understanding of opportunity costs and now they figure in his model of strategic change as well as his use of scenarios and framing to galvanize thinking and group action at the Bellagio Group conferences. Further, the paper probes the identity and background of the “team of rivals,” the so-called nongovernmental, academic economists, drawn from eleven countries, many of them chosen because they were well-known advocates for divergent, often feuding, schools of thought on the problems and solutions to problems facing the international monetary system in the 1960s, most of whom had had significant public policy experience before entering academia. How did the Bellagio Group turn the tide of policy-maker and central banker opinion toward exchange rates as an instrument to correct balance of payments problems, as contemporaries suggested? My research finds the answer in Fritz Machlup’s collaborative and iterative approach to strategy and his cross-functional, cross-geographic, approach to organization.