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International Finance and Geopolitics

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  • Barry Eichengreen

Abstract

Recent events, notably financial sanctions imposed on Russia by the USA and its geopolitical allies together with mounting economic and political tensions between the USA and China, have highlighted the role of geopolitics in shaping global monetary and financial relations. What these developments imply for the future will turn on how US–China tensions play out. In what follows I consider two scenarios: the status‐quo scenario and the breakdown‐in‐relations scenario. The former would see ongoing but very gradual international reserve and financial diversification from the dollar to the renminbi. The latter see a bifurcation of the international financial system into two silos centered on the respective currencies, with highly disruptive implications for the global economy.

Suggested Citation

  • Barry Eichengreen, 2024. "International Finance and Geopolitics," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 84-100, January.
    • Handle: RePEc:bla:asiapr:v:19:y:2024:i:1:p:84-100
    DOI: 10.1111/aepr.12436
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    References listed on IDEAS

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    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. Barry Eichengreen & Arnaud Mehl & Livia Chiţu & Thorsten Beck, 2019. "Mars or Mercury? The geopolitics of international currency choice," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 315-363.
    3. Imad Moosa & Larry Li & Riley Jiang, 2016. "Determinants of the Status of an International Financial Centre," The World Economy, Wiley Blackwell, vol. 39(12), pages 2074-2096, December.
    4. 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.
    5. Barry Eichengreen & Arnaud Mehl & Livia Chițu, 2021. "Mars or Mercury redux: The geopolitics of bilateral trade agreements," The World Economy, Wiley Blackwell, vol. 44(1), pages 21-44, January.
    6. Barry Eichengreen & Guangtao Xia, 2019. "China and the SDR: Financial Liberalization through the Back Door," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-36, September.
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    Cited by:

    1. Yiping Huang, 2024. "Comment on “International Finance and Geopolitics”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 103-104, January.
    2. Takatoshi Ito & Kazumasa Iwata & Colin McKenzie & Shujiro Urata, 2024. "Deglobalization: Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 1-17, January.

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