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China vs. U.S.: IMS Meets IPS

Author

Listed:
  • Maggiori, Matteo
  • Farhi, Emmanuel

Abstract

Currently both the International Monetary System (IMS) and the International Price Systems (IPS) are dominated by the U.S. The emergence of China, both as reserve currency and as a currency of invoicing, is likely to disrupt this status quo. We provide a framework to understand the forces that will shape this transition and identify sources of instability. We highlight the risk of an abrupt shift triggered by a run on the dollar.

Suggested Citation

  • Maggiori, Matteo & Farhi, Emmanuel, 2019. "China vs. U.S.: IMS Meets IPS," CEPR Discussion Papers 13453, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13453
    as

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    References listed on IDEAS

    as
    1. Gita Gopinath & Jeremy C Stein, 2021. "Banking, Trade, and the Making of a Dominant Currency," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 783-830.
    2. Ryan Chahrour & Rosen Valchev, 2017. "International Medium of Exchange: Privilege and Duty," Boston College Working Papers in Economics 934, Boston College Department of Economics.
    3. Ito, Hiro & Kawai, Masahiro, 2016. "Trade invoicing in major currencies in the 1970s–1990s: Lessons for renminbi internationalization," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 123-145.
    4. Gita Gopinath & Jeremy C Stein, 0. "Banking, Trade, and the Making of a Dominant Currency," The Quarterly Journal of Economics, Oxford University Press, vol. 136(2), pages 783-830.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Reserve currencies; Triffin dilemma; Nurkse instability; Confidence crises; Safe assets; Exorbitant privilege; Dollar; Rmb;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F3 - International Economics - - International Finance
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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