[ 2nd December 2010 by Kumar Gaurav 0 Comments ]

The future of the U.S. Dollar as an international key currency

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The future of the U.S. Dollar as an international key currency


Abstract: For the past 60 years and more the international monetary system’s need for international money was discharged by the U.S. dollar as the supreme international currency. Although the dollar’s global role is still virtually unchallenged, worrying cracks are appearing in the supporting economic determinants of the dollar’s key currency status. This paper analyzes the need for an international means of payment, the attributes of the key currency country and the determinants of key currency status. The paper indicates that certain characteristics of and trends in the U.S. economy supporting its key currency status have reached disquieting negative magnitudes that do not augur well for the future of the dollar. Nevertheless, the absence of a currency competitor, the strength of network externalities and historical inertia will, together with the dominant milieu role played by the United States, possibly keep the dollar in its superior position for a considerable time to come.
Keywords: dollar supremacy; American hegemony; key currency status; international liquidity.

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