The Federal Reserve, the Bank of England and the rise of the dollar as an international currency, 1914-39
AbstractThis paper provides new evidence on the rise of the dollar as an international currency, focusing on its role in the conduct of trade and the provision of trade credit. We show that the shift to the dollar occurred much earlier than conventionally supposed: during and immediately after World War I. Not just market forces but also policy support - the Fed in its role as market maker - was important for the dollar's overtaking of sterling as the leading international currency. On balance, this experience challenges the popular notion of international currency status as being determined mainly by market size. It suggests that the popular image of strongly increasing returns and pervasive network externalities leaving room for only one monetary technology is misleading.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 328.
Length: 45 pages
Date of creation: Dec 2010
Date of revision:
foreign exchange reserves; network externalities; path dependency; money markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-18 (All new papers)
- NEP-CBA-2010-12-18 (Central Banking)
- NEP-HIS-2010-12-18 (Business, Economic & Financial History)
- NEP-IFN-2010-12-18 (International Finance)
- NEP-MON-2010-12-18 (Monetary Economics)
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