2016年-PIIE彼得森国际经济研究所_The_Future_of_the_Dollar_6页_189kb

The Future of the Dollar: A Summary

Core Content

Richard N. Cooper discusses the future of the US dollar as the dominant international currency. He argues that the dollar's status is not due to policy design, but rather to its evolutionary acceptance and practical advantages in the global financial system. Cooper examines whether any other currency or a synthetic currency like the SDR (Special Drawing Rights) could replace the dollar, and concludes that while alternatives may gain traction, the dollar is unlikely to be seriously displaced.

Main Views

• The Dollar's Dominance is by Practice, Not Design
  The US dollar is the most widely used international currency due to its convenience, liquidity, and widespread acceptance, not because of any deliberate policy. It benefits from network externalities, where its popularity reinforces its utility and vice versa.

• Challenges for Alternatives
  Cooper evaluates several potential alternatives to the dollar:

  • Euro: While the euro has grown in international use, particularly among EU members and economically linked countries, its capital market remains fragmented and less liquid than the US dollar market. The euro is not yet a viable replacement for the dollar on a global scale.

  • Yen and British Pound: These currencies have limited international use due to lower liquidity and market development compared to the dollar.

  • Yuan: The Chinese yuan is not currently suitable as an international currency due to the lack of a well-developed capital market and the non-convertible nature of the Chinese currency. However, these conditions may change in the future.

  • SDR (Special Drawing Rights): A synthetic currency proposed by the IMF, the SDR is not yet widely used. Its adoption would require significant changes to the international financial system, including access for private parties and resolving practical issues related to issuance and management.

• The Dollar as a Store of Value
  The dollar faces challenges as a store of value due to its fluctuating purchasing power. However, interest rates on US securities may compensate for this, and the US is not expected to experience higher inflation than other major economies in the near term.

• Potential Displacement of the Dollar
  Cooper acknowledges that a deliberate international decision to create a new global currency could displace the dollar, but such a move would face significant practical and political obstacles. The benefits of such a shift would need to be substantial to justify the effort.

• Benefits and Costs of the Dollar's International Role
  The dollar provides the US with certain advantages, such as seigniorage and access to global capital markets, but also imposes costs, such as the need to maintain international confidence and the potential loss of competitiveness in global trade.

• China and the Dollar
  Cooper addresses concerns about China potentially using its large dollar holdings as a tool to destabilize the US economy. He argues that such actions are unlikely to have a significant impact, as they would be offset by the responses of other major economies like Japan and Europe. China is also unlikely to sell its dollar holdings at a low cost, as it has no viable alternative to replace them.

Key Information

• The dollar's role as an international currency is supported by its high liquidity, widespread use, and convenience.
• The euro-based capital market is still fragmented and less liquid than the US dollar market.
• The SDR is a synthetic currency with potential but faces practical and political challenges.
• The US public debt may increase due to the financial crisis, but it is not expected to significantly worsen the country's financial position relative to others.
• China's dollar holdings are unlikely to be sold off due to lack of alternatives and the potential costs involved.
• Demographic trends suggest that the US will remain the largest economy, while Europe and Japan will see a decline in their relative importance.
• The "exorbitant privilege" of the dollar is not as beneficial as often claimed, and its international use comes with costs that must be weighed against benefits.

Conclusion

Cooper concludes that the US dollar is likely to remain the dominant international currency for the foreseeable future. While alternatives like the euro and SDR may gain more use, they are not yet capable of displacing the dollar. A deliberate shift to a new global currency would require overcoming major practical and political hurdles, and the current conditions make such a move unlikely. The dollar's role will continue to evolve, but it will not be seriously displaced in the near term.