How Global Currencies Work

Barry Eichengreen; Arnaud Mehl; Livia Chitu

Published by Princeton University Press 2018

How Global Currencies Work

Past, Present, and Future

Barry Eichengreen, Arnaud Mehl and Livia Chitu

https://doi.org/10.1515/9781400888573

Overview
Contents

About this book

A powerful new understanding of global currency trends, including the rise of the Chinese yuan

At first glance, the modern history of the global economic system seems to support the long-held view that the leading world power’s currency—the British pound, the U.S. dollar, and perhaps someday the Chinese yuan—invariably dominates international trade and finance. In How Global Currencies Work, three noted economists provide a reassessment of this history and the theories behind the conventional wisdom.

Offering a new history of global finance over the past two centuries, and marshaling extensive new data to test established theories of how global currencies work, Barry Eichengreen, Arnaud Mehl, and Livia Chiţu argue for a new view, in which several national monies can share international currency status, and their importance can change rapidly. They demonstrate how changes in technology and in the structure of international trade and finance have reshaped the landscape of international currencies so that several international financial standards can coexist. They show that multiple international and reserve currencies have in fact coexisted in the pastupending the traditional view of the British pound’s dominance prior to 1945 and the U.S. dollar’s dominance more recently.

Looking forward, the book tackles the implications of this new framework for major questions facing the future of the international monetary system, from whether the euro and the Chinese yuan might address their respective challenges and perhaps rival the dollar, to how increased currency competition might affect global financial stability.

Author information

Barry Eichengreen is the George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley. His books include Hall of Mirrors, Exorbitant Privilege, Globalizing Capital, and The European Economy since 1945. Arnaud Mehl is principal economist at the European Central Bank. Livia Chiţu is an economist at the European Central Bank.

Reviews

"The authors put the plural back into global currencies, for good reason. As their historical but highly topical research establishes, there can be more than one global (or ‘reserve') currency at any one time, as has often been the case in the modern world. This is an important corrective to the recurring oversold yen then euro then yuan will rival the dollar litany. But it is also a reminder that there is more to a stable global financial system than how many currencies there are, but how the leaders of those currencies take responsibility and interact."Adam S. Posen, President, Peterson Institute for International Economics

A readable and timely book.

The authors conclude that the euro, in particular, will play a more consequential role in international reserves relative to the US dollar, while China’s renminbi will be slower to achieve acceptance.---Ian McLennan, Spear's Magazine

"Barry Eichengreen, our pre-eminent international monetary historian, and his coauthors have written a great book around the central theme that there have almost always been multiple rival international currencies and that the advantages of being the world's lead currency are not as marked as traditionally argued. The book is lucidly written, eschewing mathematical technicalities, though the background scholarship is deeply impressive. It should be read by everyone interested in the monetary history of the past two centuries."—Charles Goodhart, London School of Economics and Political Science

"This book will come to be known as the one that challenged the old, winner-takes-all view of international currency competition and established the new view. Barry Eichengreen and his coauthors present thorough and telling evidence that the historical reality is that multiple currencies play consequential roles in international trade and finance—and that lock-in effects and persistence are not as strong as traditionally assumed. In short, this is a must-read for all economists interested in international macroeconomics and finance."—Richard Baldwin, Graduate Institute of International and Development Studies, Geneva

"Drawing on new data, this book provides a rich contextual and historical analysis of reserve currencies in the global economy. This is very welcome, indeed."—Sebastian Edwards, University of California, Los Angeles

"This eloquent and learned book will become the standard—perhaps one should say the gold standard—for discussions of international currency regimes, and for the analysis of the uncertainties that accompany changing global leadership."—Harold James, Princeton University

How Global Currencies Work is an ambitious title that delivers fascinating analysis on the rise and fall of international currencies in the 20th century with some educated suggestions about their trajectories in the 21st.---Christopher Smart, Project Syndicate

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Frontmatter Publicly Available Download PDF	i
Contents Publicly Available Download PDF	v
List of Tables Requires Authentication Unlicensed Licensed Download PDF	vii
List of Figures Requires Authentication Unlicensed Licensed Download PDF	ix
Acknowledgments Requires Authentication Unlicensed Licensed Download PDF	xiii
1 Introduction Requires Authentication Unlicensed Licensed Download PDF	1
2 The Origins of Foreign Balances Requires Authentication Unlicensed Licensed Download PDF	16
3 From Jekyll Island to Genoa Requires Authentication Unlicensed Licensed Download PDF	30
4 Reserve Currencies in the 1920s and 1930s Requires Authentication Unlicensed Licensed Download PDF	42
5 The Role of Currencies in Financing International Trade Requires Authentication Unlicensed Licensed Download PDF	58
6 Evidence from International Bond Markets Requires Authentication Unlicensed Licensed Download PDF	84
7 Reserve Currency Competition in the Second Half of the Twentieth Century Requires Authentication Unlicensed Licensed Download PDF	116
8 The Retreat of Sterling Requires Authentication Unlicensed Licensed Download PDF	145
9 The Rise and Fall of the Yen Requires Authentication Unlicensed Licensed Download PDF	158
10 The Euro as Second in Command Requires Authentication Unlicensed Licensed Download PDF	170
11 Prospects for the Renminbi Requires Authentication Unlicensed Licensed Download PDF	181
12 Conclusion Requires Authentication Unlicensed Licensed Download PDF	195
Notes Requires Authentication Unlicensed Licensed Download PDF	201
References Requires Authentication Unlicensed Licensed Download PDF	227
Index Requires Authentication Unlicensed Licensed Download PDF	245
A NOTE ON THE TYPE Requires Authentication Unlicensed Licensed Download PDF	251