Changes in the international monetary system: opportunities and risks for the US dollar

Economic Annals-ХХI: Volume 183, Issue 5-6, Pages: 4-16

Citation information:
Sielska, A. (2020). Changes in the international monetary system: opportunities and risks for the US dollar. Economic Annals-XXI, 183(5-6), 4-16. doi: https://doi.org/10.21003/ea.V183-01

Alicja Sielska
PhD (Economics),
Associate Professor,
Institute of Economic Sciences,
Faculty of Law,
Administration and Economics,
University of Wroclaw
22/26 Uniwersytecka Str., Wroclaw, 50-145, Poland
alicja.sielska@uwr.edu.pl
ORCID ID: https://orcid.org/0000-0002-0199-062X

Changes in the international monetary system: opportunities and risks for the US dollar

Abstract. In the 1940s, the US dollar was established as an international currency. Since then, its position has been practically unchallenged. However, in light of the financial crisis of 2008, the strengthening of the Chinese and European economies, and the COVID-19 pandemic, it is necessary to reflect on the future balance of power in the international monetary system. To this end, this article poses the following research question: is the US dollar facing a threat to its leading position in the global arena?

First, I describe the historical currency system and the position of the dollar after the 2008 crisis; next I analyze the pandemic up through the end of June 2020. Then, I consider three possible scenarios for the dollar. First, it is possible to create a new global currency which would consist of a basket of the five most important world currencies. The second option is to replace the dollar with another currency, especially the euro or the renminbi. The third and most probable scenario is the compresence of several competing national currencies in international trade. Abandoning the dollar is possible, but it would require significant financial and institutional changes. This means that in the absence of any easy solutions for dethroning the US currency, it will remain the world’s leading currency.

Keywords: International Monetary System; US Dollar; International Currency

JEL Classification: E40; E42; F32

Acknowledgements and Funding: The author received no direct funding for this research.

Contribution: The author contributed personally to this work.

DOI: https://doi.org/10.21003/ea.V183-01

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Received 11.04.2020
Received in revised form 20.05.2020
Accepted 26.05.2020
Available online 4.06.2020
Updated version of the paper as of 10.09.2020