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Dominant Currencies, Special Drawing Rights and Supernational Bank Money

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  • Pietro Alessandrini
  • Michele Fratianni

Abstract

The current international monetary system (IMS) is fragile because the dollar standard is rapidly deteriorating. The dual role of the dollar as the dominant international money and national money cannot easily be reconciled because the US monetary authorities face a conflict between pursuing domestic objectives of employment and inflation, and maintaining the international public good of stable money. To strengthen the IMS, China has advocated the revitalisation of the special drawing rights (SDRs), but SDRs are neither money nor a claim on any international institution; are issued exogenously without any consideration for countries’ external imbalances; and can activate international monies only though bilateral transactions. The historical record of SDRs as international reserves is altogether unimpressive. We propose instead the creation of a supernational bank money (SBM) within the institutional setting of a clearing union. This union would be a fully fledged agreement by participating central banks on specific rules of the game, such as size and duration of overdrafts, designation of countries that would have to bear the burden of external adjustment, and coordination of monetary policies objectives and at expense of the maintenance of the international public good.

Suggested Citation

  • Pietro Alessandrini & Michele Fratianni, 2009. "Dominant Currencies, Special Drawing Rights and Supernational Bank Money," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(4), pages 45-68, October.
  • Handle: RePEc:wej:wldecn:396
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    Cited by:

    1. Riccardo Fiorentini, 2011. "Global Imbalances, the International Crisis and the Role of the Dollar," Working Papers 18/2011, University of Verona, Department of Economics.
    2. Riccardo Fiorentini & Guido Montani, 2012. "The New Global Political Economy," Books, Edward Elgar Publishing, number 14443.
    3. Pietro Alessandrini & Andrea Filippo Presbitero, 2011. "Low-Income Countries Vulnerabilities and the Need for an SDR-Based International Monetary System," Mo.Fi.R. Working Papers 55, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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