TEXTO PARA DISCUSSÃO | The international monetary system hierarchy: current configuration and determinants

Bruno De Conti
Daniela Magalhães Prates

This paper aims to analyze the current International Monetary System (IMS), focusing on the usage of different national currencies at the international scenario. In fact, only a few currencies are able to fulfill money classical functions beyond the national borders of their issuing country, configuring an IMS that is absolutely hierarchized. It is broadly known that the US dollar is the key-currency, but some questions arise when the analysis is deepened, among which: what is precisely the share of each currency in the fulfillment of the three functions of money at the international level? What determines the current configuration of the IMS? In order to answer to these questions, this paper presents firstly the data for the international usage of currencies, splitting the analysis into the private and the public usage – i.e.: means of payment, price setting and investment currency (private usage); and intervention currency, reference currency and reserve currency (public usage).

Although there is not a database that provides all these information, a quest over many sources allows us to provide a map of the current IMS configuration. Secondly, this paper analyses the possible determinants of the international usage of national currencies, proposing three most important ones: i) the dimension of the national economy and its integration in the world economy; ii) the geopolitical power of the country; iii) the government’s political will to internationalize the currency. Thirdly, the paper examines the effects of the global financial crisis over the IMS configuration, showing that the US dollar has kept its role almost unaltered, but the euro has suffered a loss in its share in the international fulfillment of some money functions – notably as means of payment and public reserve currency; on the other hand, some peripheral currencies are becoming more and more important at the international sphere, specially the Chinese yuan, whose share in international transactions is still modest, but rapidly increasing.