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Abstract
The understanding of the behavioral economics of how the US$ has been performing as an international reserve currency since 1945 seems to face a serious threat posed by the BRICS coalition nowadays. The study aimed to assess the long-term stability of the US dollar as an international reserve currency in light of the emerging challenge from the BRICS coalition. The research used ARDL and ECM analysis to address two main questions. First, the study confirmed that the US dollar’s long-term equilibrium as a reserve currency is stable. Second, it found that the US economic and monetary infrastructure appeared more resilient than that of the BRICS countries. This suggests that a shift away from the US dollar as a world reserve currency is not likely in the near future. The study also raised the need to consider designing a better monetary system for the modern world.
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References
- Arslanalp, S. et. al. (2022). The Stealth Erosion of Dollar Dominance. IMG Working Paper W/22/58 dated March 2022, p. 21.
- Bansal, R. & Singh, S. (2021). China’s Digital Yuan: An Alternative to the Dollar-dominated Financial System. Carnegie Endowment for International Peace working paper, pp. 4 and 5. https://carnegieendowment.org/files/202108-Bansal_Singh_-_Chinas_Digital_Yuan.pdf
- Bartik, A. and Karabulut, K. (2023). International Reserve Currencies and the Future of the Chinese Yuan. KAUJEASF open access publication, 14 (28), 814-846. https://dergipark.org.tr/en/download/article-file/3468463
- Bhatta, G.R. & Shrestha, M.B. (2018). Selecting appropriate methodological framework for time series analysis. The Journal of Finance and Data Science, 4 (2), pp. 71-89 https://www.sciencedirect.com/science/article/pii/S2405918817300405
- Boughton, J.M., 2002. Why White, Not Keynes? Inventing the Post-War International Monetary System. IMF Working Paper WP/02/52 open access publication. https://www.imf.org/external/pubs/ft/wp/2002/wp0252.pdf
- Brueckner, M. (2021). Infrastructure and Economic Growth. Risk Financial Management Journal (MDPI), 14 (11), p. 543. https://www.mdpi.com/1911-8074/14/11/543
- Calvo, G. & Frenkel, J.A. (1991). Obstacles to Transforming Centrally-Planned Economies. IMF e-Library open access publication dated July 1, 1991. https://www.elibrary.imf.org/view/journals/001/1991/066/article-A001-en.xml
- Costigan, T. et. al. (2017). The US$ As the Global Reserve Currency: Implications for US Hegemony. World Review of Political Economy journal, 8 (1). https://www.jstor.org/stable/10.13169/worlrevipoliecon.8.1.0104?seq=1
- Dimand, R.W. (2013). David Hume and Irving Fisher on the quantity theory of money in the long run and short run. The European Journal of History of Economic Thoughts, 20 (2). https://www.tandfonline.com/doi/full/10.1080/09672567.2012.758760
- Dunn, G. (2022). An Overview of Russian Countersanctions and Further Measures Against So-Called “Unfriendly States.” Gibson Dunn open access publication. https://www.gibsondunn.com/russia-responds-to-international-sanctions-an-overview-of-russian-countersanctions-and-further-measures-against-so-called-unfriendly-states/
- Eagle, J. (2021). Here’s how reserve currencies have evolved over 120 years. Visual Capitalist open access article. https://www.visualcapitalist.com/cp/how-reserve-currencies-evolved-over-120-years/
- Ferreira, C. (2022). Panel Granger Causality Between Financial Development and Economic Growth. Springer Link open access publication, February 4, 2022. https://link.springer.com/article/10.1007/s11294-022-09838-7
- Ghizoni, S.K. (1971). Nixon Ends the Convertibility of the US$ to Gold and Announces Wage/Price Controls. Federal Reserve History open access publication. https://www.federalreservehistory.org/essays/gold-convertibility-ends
- Garver, R. (2022). Russia’s Latest Move Toward “De-Dollarization” Seen as Symbolic. VOA News, Europe, open publication. https://www.voanews.com/a/russia-s-latest-move-toward-de-dollarization-seen-as-symbolic-/6721720.html
- Hill, T. (2023). China’s de-dollarization message finds a receptive audience in North Africa. MENASource open access publication. https://www.atlanticcouncil.org/blogs/menasource/china-dedollarization-north-africa/
- Hooijmaaijers, B. (2021). The BRICS Countries’ Bilateral Economic Cooperation, 2009 to 2019: Between Rhetoric and Reality. SAGE open access journal, October-December 2021 issue, pp. 4-6. https://journals.sagepub.com/doi/pdf/10.1177/21582440211054128
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- Johansen, S. (2020). Co-integration. Overview and Development. University of Copenhagen, Scholarly Analysis. Retrieved from: https://www.fsb.miamioh.edu/lij14/672_johansen.pdf
- Kaltenbrunner, A. & Lysandrou, P. (2017). The US Dollar’s Continuing Hegemony As An International Currency: A Double Matrix Analysis. White Rose Research Online. http://eprints.whiterose.ac.uk/104402/
- Linney, B. D. et. al. (2023). Current State of US Economic Sanctions Imposed on the Russian Federation and Covered Regions of Ukraine in Response to the Russian Federation’s Invasion of Ukraine – March 2023. BakerHostetler open access publication. https://www.bakerlaw.com/Current-State-of-US-Economic-Sanctions-Imposed-on-the-Russian-Federation-and-Covered-Regions-of-Ukraine-in-Response-to-the-Russia-Federations-Invasion-of-Ukraine-March-2023
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- Loef, H.E. & Monissen, H.G. (1999). Monetary policy and monetary reform: Irving Fisher’s contributions to monetary macroeconomics. ECONSTOR open access publication, Wurzburg Economic Paper No. 11. https://www.econstor.eu/bitstream/10419/48451/1/309835135.pdf
- Martins, A. (2014). The Euro, the Dollar, and the Renminbi. Can This Triumvirate be a Leader of a Renovated International Monetary System? Universite Catholique de Louvin and Universite Saint Louis academic paper, September issue, p. 34. https://www.academia.edu/13121431/The_Euro_the_Dollar_and_the_Renminbi_Can_This_Triumvirate_be_the_Leader_of_a_Renovated_International_Monetary_System?email_work_card=thumbnail
- McBride, J. et. al. (2023). China’s Massive Belt and Road Initiative. Councils on Foreign Relations open access publication. https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative
- McNamara, P. (2023). Why a BRICS currency is a flawed idea. The Financial Times Limited 2023, dated February 10, 2023. https://www.ft.com/content/02d6ab99-ea36-41c4-9ad3-9658bb1894a7
- Nelson, R.M. & Sutter, K.M. (2021). De-Dollarization Efforts in China and Russia. IN FOCUS Congressional Research Service. https://crsreports.congress.gov/product/pdf/IF/IF11885
- Ozeki, Y. and Tavlas, G.S. (1992). The Internationalization of Currencies: An Appraisal of Japanese Yen. International Monetary Fund open access publication, Occasional Paper No. 1992/001, January 15, 1992. https://www.imf.org/en/Publications/Occasional-Papers/Issues/2016/12/30/The-Internationalization-of-Currencies-An-Appraisal-of-the-Japanese-Yen-60
- Qiu, H. & Zhao, M. (2019). The US dollar and the new imperialism under the logic of capital accumulation. China Political Economy journal 2 (1). https://www.emerald.com/insight/content/doi/10.1108/CPE-04-2019-0013/full/pdf
- Said, S. & Kalin, S. (2022). Saudi Arabia considers accepting yuan instead of dollars for Chinese oil sales. Wall Street Journal March 15, 2022 issue. https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541
- Siripurapu, A. and Berman, N. (2023). The Dollar: The World’s Reserve Currency. Council on Foreign Relations open access publication, July 19, 2023. https://www.cfr.org/backgrounder/dollar-worlds-reserve-currency
- Stein, P. & Uddhammar, E. (2021). China in Africa: The Role of Trade, Investments and Loans Amidst Shifting Geopolitical Ambitions. Observer Research Foundation occasional paper No. 327, August 2021 issue. https://www.orfonline.org/research/china-in-africa/
- Stobierski, T. (2021). What is GDP & Why It is Important? Harvard Business School’s Business Insights open access publication. https://online.hbs.edu/blog/post/why-is-gdp-important
- Vecchiatto, P. (2023). BRICS Draws Membership Bids from 19 Nations Before Summit. Qatar Economic Forum powered by Bloomberg open access publication. https://www.bloomberg.com/news/articles/2023-04-24/brics-draws-membership-requests-from-19-nations-before-summit#xj4y7vzkg
- Weiss, C. (2022). Geopolitics and the US$ Future As A Reserve Currency. Federal Reserve Governor’s. International Finance Discussion Papers 1359 dated October 2022. https://www.federalreserve.gov/econres/ifdp/files/ifdp1359.pdf
- Williamson, J. (1985). On the System in Bretton Woods. American Economic Association on JSTOR publication, 75 (2), p. 75. https://www.jstor.org/stable/1805574
References
Arslanalp, S. et. al. (2022). The Stealth Erosion of Dollar Dominance. IMG Working Paper W/22/58 dated March 2022, p. 21.
Bansal, R. & Singh, S. (2021). China’s Digital Yuan: An Alternative to the Dollar-dominated Financial System. Carnegie Endowment for International Peace working paper, pp. 4 and 5. https://carnegieendowment.org/files/202108-Bansal_Singh_-_Chinas_Digital_Yuan.pdf
Bartik, A. and Karabulut, K. (2023). International Reserve Currencies and the Future of the Chinese Yuan. KAUJEASF open access publication, 14 (28), 814-846. https://dergipark.org.tr/en/download/article-file/3468463
Bhatta, G.R. & Shrestha, M.B. (2018). Selecting appropriate methodological framework for time series analysis. The Journal of Finance and Data Science, 4 (2), pp. 71-89 https://www.sciencedirect.com/science/article/pii/S2405918817300405
Boughton, J.M., 2002. Why White, Not Keynes? Inventing the Post-War International Monetary System. IMF Working Paper WP/02/52 open access publication. https://www.imf.org/external/pubs/ft/wp/2002/wp0252.pdf
Brueckner, M. (2021). Infrastructure and Economic Growth. Risk Financial Management Journal (MDPI), 14 (11), p. 543. https://www.mdpi.com/1911-8074/14/11/543
Calvo, G. & Frenkel, J.A. (1991). Obstacles to Transforming Centrally-Planned Economies. IMF e-Library open access publication dated July 1, 1991. https://www.elibrary.imf.org/view/journals/001/1991/066/article-A001-en.xml
Costigan, T. et. al. (2017). The US$ As the Global Reserve Currency: Implications for US Hegemony. World Review of Political Economy journal, 8 (1). https://www.jstor.org/stable/10.13169/worlrevipoliecon.8.1.0104?seq=1
Dimand, R.W. (2013). David Hume and Irving Fisher on the quantity theory of money in the long run and short run. The European Journal of History of Economic Thoughts, 20 (2). https://www.tandfonline.com/doi/full/10.1080/09672567.2012.758760
Dunn, G. (2022). An Overview of Russian Countersanctions and Further Measures Against So-Called “Unfriendly States.” Gibson Dunn open access publication. https://www.gibsondunn.com/russia-responds-to-international-sanctions-an-overview-of-russian-countersanctions-and-further-measures-against-so-called-unfriendly-states/
Eagle, J. (2021). Here’s how reserve currencies have evolved over 120 years. Visual Capitalist open access article. https://www.visualcapitalist.com/cp/how-reserve-currencies-evolved-over-120-years/
Ferreira, C. (2022). Panel Granger Causality Between Financial Development and Economic Growth. Springer Link open access publication, February 4, 2022. https://link.springer.com/article/10.1007/s11294-022-09838-7
Ghizoni, S.K. (1971). Nixon Ends the Convertibility of the US$ to Gold and Announces Wage/Price Controls. Federal Reserve History open access publication. https://www.federalreservehistory.org/essays/gold-convertibility-ends
Garver, R. (2022). Russia’s Latest Move Toward “De-Dollarization” Seen as Symbolic. VOA News, Europe, open publication. https://www.voanews.com/a/russia-s-latest-move-toward-de-dollarization-seen-as-symbolic-/6721720.html
Hill, T. (2023). China’s de-dollarization message finds a receptive audience in North Africa. MENASource open access publication. https://www.atlanticcouncil.org/blogs/menasource/china-dedollarization-north-africa/
Hooijmaaijers, B. (2021). The BRICS Countries’ Bilateral Economic Cooperation, 2009 to 2019: Between Rhetoric and Reality. SAGE open access journal, October-December 2021 issue, pp. 4-6. https://journals.sagepub.com/doi/pdf/10.1177/21582440211054128
Iancu, A. et. al. (2017). Reserve Currency in An Evolving International Monetary System. IMF e-Library open access publication, November 17, 2020. https://www.elibrary.imf.org/view/journals/087/2020/002/article-A001-en.xml
Jie, Y. & Wallace, J. (2021). What is China’s Belt and Road Initiative (BRI)? Chatham House open access publication. https://www.chathamhouse.org/2021/09/what-chinas-belt-and-road-initiative-bri
Johansen, S. (2020). Co-integration. Overview and Development. University of Copenhagen, Scholarly Analysis. Retrieved from: https://www.fsb.miamioh.edu/lij14/672_johansen.pdf
Kaltenbrunner, A. & Lysandrou, P. (2017). The US Dollar’s Continuing Hegemony As An International Currency: A Double Matrix Analysis. White Rose Research Online. http://eprints.whiterose.ac.uk/104402/
Linney, B. D. et. al. (2023). Current State of US Economic Sanctions Imposed on the Russian Federation and Covered Regions of Ukraine in Response to the Russian Federation’s Invasion of Ukraine – March 2023. BakerHostetler open access publication. https://www.bakerlaw.com/Current-State-of-US-Economic-Sanctions-Imposed-on-the-Russian-Federation-and-Covered-Regions-of-Ukraine-in-Response-to-the-Russia-Federations-Invasion-of-Ukraine-March-2023
Lisovolik, Y. (2023). Why a BRICS currency is the way forward for the Global South. Russian International Affairs Council (RIAC) open access publication. https://russiancouncil.ru/en/analytics-and-comments/comments/why-a-brics-currency-is-the-way-forward-for-the-global-south/
Loef, H.E. & Monissen, H.G. (1999). Monetary policy and monetary reform: Irving Fisher’s contributions to monetary macroeconomics. ECONSTOR open access publication, Wurzburg Economic Paper No. 11. https://www.econstor.eu/bitstream/10419/48451/1/309835135.pdf
Martins, A. (2014). The Euro, the Dollar, and the Renminbi. Can This Triumvirate be a Leader of a Renovated International Monetary System? Universite Catholique de Louvin and Universite Saint Louis academic paper, September issue, p. 34. https://www.academia.edu/13121431/The_Euro_the_Dollar_and_the_Renminbi_Can_This_Triumvirate_be_the_Leader_of_a_Renovated_International_Monetary_System?email_work_card=thumbnail
McBride, J. et. al. (2023). China’s Massive Belt and Road Initiative. Councils on Foreign Relations open access publication. https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative
McNamara, P. (2023). Why a BRICS currency is a flawed idea. The Financial Times Limited 2023, dated February 10, 2023. https://www.ft.com/content/02d6ab99-ea36-41c4-9ad3-9658bb1894a7
Nelson, R.M. & Sutter, K.M. (2021). De-Dollarization Efforts in China and Russia. IN FOCUS Congressional Research Service. https://crsreports.congress.gov/product/pdf/IF/IF11885
Ozeki, Y. and Tavlas, G.S. (1992). The Internationalization of Currencies: An Appraisal of Japanese Yen. International Monetary Fund open access publication, Occasional Paper No. 1992/001, January 15, 1992. https://www.imf.org/en/Publications/Occasional-Papers/Issues/2016/12/30/The-Internationalization-of-Currencies-An-Appraisal-of-the-Japanese-Yen-60
Qiu, H. & Zhao, M. (2019). The US dollar and the new imperialism under the logic of capital accumulation. China Political Economy journal 2 (1). https://www.emerald.com/insight/content/doi/10.1108/CPE-04-2019-0013/full/pdf
Said, S. & Kalin, S. (2022). Saudi Arabia considers accepting yuan instead of dollars for Chinese oil sales. Wall Street Journal March 15, 2022 issue. https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541
Siripurapu, A. and Berman, N. (2023). The Dollar: The World’s Reserve Currency. Council on Foreign Relations open access publication, July 19, 2023. https://www.cfr.org/backgrounder/dollar-worlds-reserve-currency
Stein, P. & Uddhammar, E. (2021). China in Africa: The Role of Trade, Investments and Loans Amidst Shifting Geopolitical Ambitions. Observer Research Foundation occasional paper No. 327, August 2021 issue. https://www.orfonline.org/research/china-in-africa/
Stobierski, T. (2021). What is GDP & Why It is Important? Harvard Business School’s Business Insights open access publication. https://online.hbs.edu/blog/post/why-is-gdp-important
Vecchiatto, P. (2023). BRICS Draws Membership Bids from 19 Nations Before Summit. Qatar Economic Forum powered by Bloomberg open access publication. https://www.bloomberg.com/news/articles/2023-04-24/brics-draws-membership-requests-from-19-nations-before-summit#xj4y7vzkg
Weiss, C. (2022). Geopolitics and the US$ Future As A Reserve Currency. Federal Reserve Governor’s. International Finance Discussion Papers 1359 dated October 2022. https://www.federalreserve.gov/econres/ifdp/files/ifdp1359.pdf
Williamson, J. (1985). On the System in Bretton Woods. American Economic Association on JSTOR publication, 75 (2), p. 75. https://www.jstor.org/stable/1805574