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Frontiers of Economics in China

Front Econ Chin    2011, Vol. 6 Issue (1) : 92-130     DOI: 10.1007/s11459-011-0124-6
research-article |
Global Reserve Currency System: Why Will the Dollar Standard Give Way to a Tripolar Currency Order?
Vivekanand Jayakumar1(), Barbara Weiss2()
1. Sykes College of Business, University of Tampa, Tampa, FL 33606, USA; 2. St. Petersburg Institute of International Political Economy, St. Petersburg, FL 33701, USA
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The recent financial crisis highlighted some of the underlying defects in the dollar-based reserve system. This paper argues that the era of the US hegemonic stability and unipolarity, which provided the foundation for the dollar’s sustenance as the pre-eminent global reserve currency, has already peaked and the global economy of the future will revolve around a multipolar order. The rise of China, along with other emerging markets, is rapidly redrawing the traditional Western dominated global economic system. The structural challenges facing the American economy along with the extraordinary expansion of Federal Reserve’s balance sheet and the explosion of the US government debt will diminish the attractiveness of the dollar standard going forward. Our analysis suggests that a tripolar currency order—consisting of the dollar, the yuan and the euro—will replace the dollar standard in the coming decades.

Keywords international monetary order      international currency      dollar      yuan     
Corresponding Authors: Vivekanand Jayakumar,; Barbara Weiss,   
Issue Date: 05 March 2011
 Cite this article:   
Vivekanand Jayakumar,Barbara Weiss. Global Reserve Currency System: Why Will the Dollar Standard Give Way to a Tripolar Currency Order?[J]. Front Econ Chin, 2011, 6(1): 92-130.
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