Posted on February 10, 2011 by iMFdirect
By Dominique Strauss-Kahn
(Version in Español Français 日本語)
The international monetary system (IMS) is a topic that encompasses a wide range of issues—reserve currencies, exchange rates, capital flows, and the global financial safety net, to name a few. It is one of the key issues on the G-20’s work agenda for 2011, and a topic that is eliciting lively discussion—for instance the recent, insightful report of the group chaired by Michel Camdessus, called the “Palais-Royal Initiative”.
Some are of the view that the current system works well enough. While not perfect, they point to its resilience during the crisis, citing the role of the U.S. dollar served as a safe haven asset. And now that the global recovery is underway, they see little reason to worry about the IMS. In other words, “if it ain’t broke, don’t fix it”.
I take a less sanguine view. Continue reading
Filed under: Advanced Economies, Economic Crisis, Emerging Markets, G-20, Global Governance, Globalization, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: capital controls, capital flows, early warning exercise, exchange rates, Flexible Credit Line, FSAP, G-20 mutual assessment process, global financial safety net, global imbalances, international monetary cooperation, international monetary system, macrofinancial linkages, policy coordination, precautionary credit line, regional financing mechanisms, reserve currencies, Special Drawing Rights, surveillance | 17 Comments »
Posted on September 24, 2009 by iMFdirect
By Reza Moghadam
The dollar has been the cornerstone of the international monetary system since the Second World War. It is the most important reserve currency, accounting for at least two-thirds of reserve assets, according to the IMF’s Composition of Foreign Exchange Reserves database. Among central banks that do not report this information to the IMF, it is estimated (e.g. by Brad Setser) that 70 percent is held in dollar assets.
The bulk of foreign exchange transactions involve dollars, and significantly more trade gets settled in dollars than involves the United States. Goldberg and Tille examined 23 advanced and emerging economies in Asia and Europe and found that all settled a greater proportion of their trade in dollars than their trade with the United States. The divergence was particularly stark for emerging Asia, where trade with the United States only accounted for about 20 percent of total trade but the bulk of total trade was settled in dollars. ( “Vehicle Currency Use in International Trade,” Journal of International Economics, Issue 76, Vol. 2, pp. 177-192, December 2008).
The recent crisis has prompted an abundance of commentary on the future of the international monetary system and potential alternative reserve currencies. Those calling for a re-examination of the dollar’s role include Italian economy minister Giulio Tremonti, People’s Bank of China Governor Zhou Xiaochuan, Ousmène Jacques Mandeng of Ashmore Investment Management Limited, and Nobel Laureate Joseph Stiglitz. What does all this mean for the future of the international monetary system and the role of the dollar?
Filed under: Economic Crisis, Financial Crisis | Tagged: Bretton Woods system, global currency, reserve currencies, role of the dollar, Special Drawing Rights | 5 Comments »