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Atlas constrained: the US external balance sheet and international monetary power

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  • Iain Hardie
  • Sylvia Maxfield

Abstract

We address the impact on international monetary power of the size and nature of the US's international financial assets and liabilities. Financial globalization makes critical a focus on a nation's international financial assets and liabilities, its ‘external balance sheet’. We suggest an expansion of Cohen's existing framework of international monetary power to include the implications of valuation changes in these external balance sheets, focusing on sources of valuation, sensitivity and vulnerability of the US economy to these changes and implications for US ability to use monetary statecraft. By focusing on developments since 2007 and on events over the financial crisis period, we show that the increased size and nature of the US's external balance sheet has reduced US autonomy and monetary power. Underpinning the changes in the US's external balance sheet are activities of private financial market actors whose influence in international monetary affairs has grown markedly.

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  • Iain Hardie & Sylvia Maxfield, 2016. "Atlas constrained: the US external balance sheet and international monetary power," Review of International Political Economy, Taylor & Francis Journals, vol. 23(4), pages 583-613, July.
    • Handle: RePEc:taf:rripxx:v:23:y:2016:i:4:p:583-613
    DOI: 10.1080/09692290.2016.1176587
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    References listed on IDEAS

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    1. Eswar S. Prasad, 2015. "The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance," Economics Books, Princeton University Press, edition 1, volume 1, number 10182-2.
    2. Eichengreen, Barry, 2012. "Exorbitant Privilege: The Rise and Fall of the Dollar," OUP Catalogue, Oxford University Press, number 9780199642472, Decembrie.
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    Cited by:

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    2. Artem E. Anilov & Irina V. Ivashkovskaya, 2018. "Do Boards Of Directors Affect CEO Behavior? Evidence From Payout Decisions," HSE Working papers WP BRP 69/FE/2018, National Research University Higher School of Economics.
    3. Mathis L Richtmann & Lea Steininger, 2023. "From bazooka to backstop: the political economy of standing swap facilities," Cambridge Journal of Economics, Oxford University Press, vol. 47(4), pages 681-702.

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