Beyond the dollar
The international reserve regime based mainly on the US dollar has served the world well for decades, but it faces an uncertain future as the economic hegemony of the United States is increasingly challenged by the emergence of new economic powers. The regime is flawed fundamentally, moreover, because additions to the supply of the main reserve asset require the United States to run balance-of-payments deficits, which tend to undermine confidence in the dollar. This paper proposes a transformation of the reserve regime that would cause Special Drawing Rights (SDRs) issued by the International Monetary Fund to become the main reserve asset. An orderly transition would be achieved by creating a Substitution Account into which official holders of dollars could deposit them in exchange for SDRs.
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- Peter B. Kenen, 2010. "The Substitution Account as a First Step Toward Reform of the International Monetary System," Policy Briefs PB10-6, Peterson Institute for International Economics.
- Peter B. Kenen, 2010. "Reforming the Global Reserve Regime: The Role of a Substitution Account," International Finance, Wiley Blackwell, vol. 13(1), pages 1-23, 03.
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