The US dollar still accounts for more than 60 percent of foreign exchange reserves held worldwide, but history tells us that large macroeconomic changes are usually followed by important changes in the monetary system. Yet these changes are not mechanic and rarely abrupt. Eichengreen and Flandreau (2011) recently highlighted how the pound sterling was overtaken by the US dollar as the world leading currency in the interwar period and was eventually crowned as the central currency of the international monetary system after Bretton Woods. The collapse of the Bretton Woods system opened the possibility of a challenger to the dollar but the contenders have been moderately successful so far. The internationalisation of the Japanese yen in the early 1980s effectively… Read more
