Dominance Shifts and International Currency Leadership: Past Patterns and Future Prospects




Troutman, Mark D.

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This dissertation traces changes in the dominance patterns of national government currency holdings. The work employs an analytic history technique to identify those factors and the process that leads to changes in identified patterns. The work posits a model of three “lenses” that combined provide a full understanding of changes in dominance patterns. The elements of the lenses are informed by factors that have been shown by previous research to be determinants of official reserve holdings. The first lens posits that currency dominance shifts when the incumbent undermines the value of the dominant currency in the presence of a qualified successor. The second lens views the dominant currency as a solution to a coordination problem posed by trade and settlement flows. Dominance changes when trade flows and settlement structures alter to the point that a successor currency provides a superior solution. The final lens views dominance in a public choice context. Nations vie for center currency status in order to capture the benefits and diffuse the costs over a large population. The work concludes by offering analysis of the dollar’s present position in relation to potential rival currencies.



Reserve currency, Key currency, International currency, International monetary system, International finance