Reform options for the global reserve currency system and their implications for the EU economy
Description: The central objective of the study is to provide a guidance for European policy-makers regarding a potential reform of the global reserve currency system.
After reviewing the traditional and more recent criticisms addressed to the current international monetary system, the study assesses existing proposals for reform. These can be grouped along three types of action plans:
- Repair and improve the existing system through incremental reforms
- Prepare for a multipolar system organized around two or three international currencies
- Reconstruct and create a global currency or quasi-currency in order to escape the Triffin dilemma and to provide for international liquidity management
The assessment of the different scenarios relies on evaluations with two formal models:
- A portfolio-choice model to assess the implication of alternative regimes for exchange-rate volatility
- A micro-founded macroeconomic model that will be used to study the smoothness of global rebalancing under different monetary regimes
Finally, the study provides with a macro and institutional assessment – with a focus on the role of the G-20 in giving impetus – and presents the main policy implications for the EU.
Bruegel lead: Zsolt Darvas
Other Bruegel fellows involved: Jean Pisani-Ferry, Shahin Vallée, Ignazio Angeloni
Project duration: September 2010 – August 2011
Project partner:
Funding organisation:
European Commission, Directorate General for Economic and Financial Affairs
Event:
- “Towards a new international Monetary system?”, workshop organized by the DG ECFIN, 19 May 2011, Brussels Charlemagne
Publication:
- “Global currencies for tomorrow: a European perspective” by Agnès Bénassy-Quéré, Benjamin Carton, Christophe Destais, Zsolt Darvas, Jean Pisani-Ferry, André Sapir, Shahin Vallée on 23rd July 2011