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The Dollar Dominance : Recent Episode of Trade Invoicing and Debt Issuance

Author

Listed:
  • Faudot, Adrien

    (Centre de Recherche en Economie de Grenoble (CREG))

  • Ponsot, Jean-François

    (Centre de Recherche en Economie de Grenoble (CREG))

Abstract

The international monetary system is known to be asymmetric given the dominant use of a few international currencies. The international trade of developing countries is mainly invoiced in US dollars, unlike industrialized countries which invoice a much higher share of their exports in their home currencies. The same logic is at work in the issuance of international debt. While the attempts to challenge the supremacy of the US dollars have failed in most cases, China is coming to the fore and is increasing its use of the Renminbi, even supported by its growing recognition within the International Monetary Fund. By reassessing the relevance of existing academic works, this paper demonstrates how monetary asymmetries have been reinforced in recent decades, and offers explanations related to currency choices. Finally, this paper offers the conclusion that international monetary reform is necessary. One cannot overlook that the monetary system embodies a major constraint on the sovereignty of developing countries and that some developing countries have set out to challenge the US dollar usage.

Suggested Citation

  • Faudot, Adrien & Ponsot, Jean-François, 2016. "The Dollar Dominance : Recent Episode of Trade Invoicing and Debt Issuance," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 31(1), pages 41-64.
    • Handle: RePEc:ris:integr:0678
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    Citations

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    Cited by:

    1. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2019. "Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 599-646.
    2. Ethan Ilzetzki & Carmen M Reinhart & Kenneth S Rogoff, 2020. "Why is the euro punching below its weight?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(103), pages 405-460.
    3. Katarzyna Twarowska-Mól, 2023. "Factors influencing the choice of the invoicing currency in international trade: Panel data analysis for 55 countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(1), pages 153-183, March.
    4. Davide Arioldi & Luigi Ventura & Mark David Witte, 2022. "Network‐adjusted market share and the currency denomination of trade," The World Economy, Wiley Blackwell, vol. 45(8), pages 2560-2592, August.
    5. Fisera, Boris & Workie Tiruneh, Menbere & Hojdan, David, 2021. "Currency depreciations in emerging economies: A blessing or a curse for external debt management?," International Economics, Elsevier, vol. 168(C), pages 132-165.
    6. Jeremy Samer Srouji, 2024. "Big money reigns, small money gains - but who will fix the International Monetary System?," Post-Print hal-04459960, HAL.
    7. Jong-Eun Lee, 2016. "Exchange Rate Dynamics with Foreign Reserves: Revisiting the Dornbusch Overshooting Model," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 406-414, May.
    8. Angella Faith Montfaucon, 2022. "Euro usage in international trade amidst threats to multilateralism: evidence from Malawian imports," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(2), pages 485-507, May.
    9. Bonga-Bonga, Lumengo, 2023. "Do trade frictions distort the purchasing power parity (PPP) hypothesis? A closer look," MPRA Paper 119196, University Library of Munich, Germany.

    More about this item

    Keywords

    Currency Hierarchy; Grassman’s Law; Original Sin; International Monetary System;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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