Michael Bordo Cécile Bastidon
The 20th century shift from sterling to the dollar is often cited as evidence that currency dominance is not forever. This column presents a nonlinear model of the international monetary system calibrated on historical events. Shifts in dominance require large, simultaneous combinations of shocks, with democracy and conflicts playing a central role. Stress tests suggest that dollar dominance is resilient: a decline would require repeated shocks in the US alongside major reforms in China and Europe. Parallels between the dollar’s rise in the 20th century and that of the renminbi in the 21st century should be treated with extreme caution.
Πηγή: VoxEU