Global Agenda Council on the International Monetary System 2012-2014
As a result of the continuing fallout from the financial crisis, the global macroeconomic system still faces a number of challenges: slow or declining economic growth; exchangerate volatility; asymmetry in the adjustment mechanisms between the United States, whose currency lies at the heart of the current system, and the rest of the world; excessive accumulation of foreign reserves by emerging economies; and excessive spillovers of the US monetary policy on other countries. Almost six years into the most severe economic downturn since the Great Depression, policy-makers around the world are attempting to steer their economies to safe harbour and away from the storms still bashing large parts of the global economy.
One of the spill-over effects still playing itself out is the decline of the US dollar as the dominant international reserve currency. Within the past 15 years, there has been a somewhat significant change in the composition of global reserve currencies, with the US dollar less dominant and other currencies featuring in reserve holdings.
What the Council is doing about it
In this context, the Global Agenda Council on the International Monetary System is focusing on the outlook for the global monetary system, in particular on evaluating the costs and benefits of maintaining the status quo of having a single international reserve currency. One of the main challenges to be addressed by the Council is how policy tools can be utilized to manage risk and the spillover effects associated with a unipolar reserve currency system globally. Moreover, the Council is analysing the sustainability of the current international monetary system dominated by the dollar, and is discussing the outlook for a global economic system where the dollar remains the dominant international currency.
Over the past year, the Council has analysed the risks, opportunities and policy options for engineering a multipolar currency system. With Europe’s slow march towards coordinated action on fiscal austerity and the euro, the currency may regain its strength and increase its share in global currency reserves.
“One of the spill-over effects still playing itself out is the decline of the US dollar as the dominant international reserve currency.”
The continued strong growth of the Chinese economy means it surpasses the United States as the largest contributor to global GDP. Once China removes the current capital controls and allows full convertibility, the yuan will emerge as a global reserve currency. The Council’s analysis has served as the basis for a report on the internationalization of the renminbi, which will be presented at a high-level conference on the international monetary system to be held in Shanghai for Chinese policy-makers and central bank officials. In the coming year, the Council will continue to analyse the dynamics of the global monetary system and key actions taken by policy-makers to ensure macroeconomic stability.
To get involved please contact
Council Manager: Liana Melchenko, Associate Director, Knowledge Management, Global Agenda Councils, email@example.com
Forum Lead: Michael Drexler, Senior Director, Head of Investors Industries, firstname.lastname@example.org
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