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The U.S. dollar’s “exorbitant privilege” remains

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  • Otaviano Canuto

Abstract

Recent initiatives and policy moves by China and other countries to extend the reach of use of the renminbi in the international monetary system, while the U.S. dollar share in global reserves has slightly shrunk in relative terms, have sparked frequent discussions about a hypothetical “de-dollarization” of the global economy. We approach here what that would mean in terms of global currency functions as means of payment and store of value. While we point out a relative decline of the U.S. dollar weight in those functions more recently, we also highlight gravitational factors that tend to uphold its position. Therefore, the “exorbitant privilege” that the U.S. dollar has provided to its issuer is likely to remain.

Suggested Citation

  • Otaviano Canuto, 2023. "The U.S. dollar’s “exorbitant privilege” remains," Policy briefs on Economic Trends and Policies 2322, Policy Center for the New South.
    • Handle: RePEc:ocp:pbecon:pb_21_23
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    References listed on IDEAS

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    1. Michael Pettis, 2022. "Will the Chinese renminbi replace the US dollar?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 10(4), pages 499-512, July.
    2. Mr. Serkan Arslanalp & Mr. Barry J. Eichengreen & Chima Simpson-Bell, 2022. "The Stealth Erosion of Dollar Dominance: Active Diversifiers and the Rise of Nontraditional Reserve Currencies," IMF Working Papers 2022/058, International Monetary Fund.
    3. Ricardo J Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2021. "Global Imbalances and Policy Wars at the Zero Lower Bound [“Safe Assets”]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2570-2621.
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