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The international monetary system is changing: what opportunities and risks for the euro?

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  • Ignazio Angeloni
  • André Sapir

Abstract

After a thirty-year pause, discussions on the future of the international monetary system (IMS) have restarted. This is partly due to the fact that the IMS has facilitated, or at least not prevented, the economic and financial imbalances that led to the recent crisis. This paper argues that the international position of the US dollar is likely to erode in the coming years, though the speed of the process is uncertain. This will create a demand for other currencies to be used internationally as means of payment and store of value. The most likely candidates for filling the partial vacuum created by the dollarâ??s decline are the euro and the Chinese renminbi. The probability that the renminbi will eventually become one of the worldâ??s key currencies is very high, but the speed of the process is uncertain. As far as the euro is concerned, much will depend on if and how the sovereign debt crisis is resolved. Our view is that the crisis will be dealt with and that it will result in radical steps towards fiscal and financial integration. If such steps are taken, the euro will secure both internal stabilisation and a growing international role.

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Paper provided by Bruegel in its series Working Papers with number 632.

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Date of creation: Nov 2011
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Handle: RePEc:bre:wpaper:632

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  1. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 11-66 National Bureau of Economic Research, Inc.
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  7. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
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  9. Michael D. Bordo & Agnieszka Markiewicz & Lars Jonung, 2011. "A Fiscal Union for the Euro: Some Lessons from History," NBER Working Papers 17380, National Bureau of Economic Research, Inc.
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Cited by:
  1. Tomasz Brodzicki, 2012. "On optimality or non-optimality of the eurozone," Working Papers 1201, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.

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