The Dollar Hegemon? Evidence and Implications for Policymakers

Pierre-Olivier Gourinchas

Chapter 7 in The Asian Monetary Policy Forum:Insights for Central Banking, 2021, pp 264-300 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper reviews the central role of the U.S. dollar in the global trade, financial and monetary systems. The dominance of the U.S. dollar as an invoicing, issuance, anchor and reserve currency has increased over time, especially so and somewhat paradoxically since the end of the Bretton Woods system. The dollar is now the ‘hegemon’ currency. I propose an explanation based on the growing complementarities between the role of the dollar for international trade and for international financial transactions. I also discuss the implications for policymakers of living in a ‘dollar world.’ The paper concludes with a discussion of some possible challenges to the dollar’s hegemony.

Keywords: Monetary Policy; Price Stability; Monetary Sovereignty; Monetary Policy Independence; Macroprudential Policies Financial Stability; Financial Volatility; Financial Globalization; Capital Mobility Trilemma; Dilemma; Small Open Economies; Emerging Market Economies; Exchange Rate Regime; Floating Exchange Rate; Pegged Exchange Rate; Real Exchange Rate; Nominal Exchange Rate; International Monetary System; Bond Markets; International Claims; Currency Market; Market Liberalization; Capital Control; Exchange Rate Intervention; Foreign Exchange Reserves; Dollar Hegemon; Dollar Dominance; International Payment System; Invoicing Currency; Integrated Policy Framework; Risk-on; Risk-off; Safe Assets; Global Financial Architecture (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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