Peterson Institute publications
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search

Policy Brief 09-21

The Future of the Dollar

by Richard N. Cooper, Harvard University

September 2009

View full document [pdf]

The global financial and economic crisis and prospects for large and sustained budget deficits in the United States have prompted countries with massive dollar holdings such as China to consider alternatives to the US dollar. These countries realize that they would suffer losses if inflation eroded the value of the dollar securities they own. Are there feasible alternatives to the US dollar as a widely used international currency? Richard Cooper looks at possible alternatives—major currencies in use, such as the euro, the yen, the pound, or even the Chinese renminbi, and a synthetic currency such as the special drawing rights of the International Monetary Fund—and concludes that no other currency seems likely to overtake the US dollar, and it is likely to remain the dominant international currency for a long time. He notes that international use of the euro will grow, perhaps even more rapidly than that of the dollar for some years, but because of limitations on issuers and financial markets, the euro is not likely to displace the dollar. In a growing world economy, there is room for both. A deliberate international decision to create an international currency could displace the dollar, but that task would be formidably difficult. The prospective gains from such a creation would have to be sufficiently great to make governments willing to overcome the practical difficulties and to adopt the complementary policies (mainly concerning exchange rates) necessary to give a new international currency a compelling advantage over present arrangements.


Policy Brief 14-25: Estimates of Fundamental Equilibrium Exchange Rates, November 2014 November 2014

Policy Brief 14-17: Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do June 2014

Policy Brief 13-28: Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis November 2013

Op-ed: Unconventional Monetary Policy: Don't Shoot the Messenger November 14, 2013

Op-ed: Misconceptions About Fed's Bond Buying September 2, 2013

Working Paper 13-2: The Elephant Hiding in the Room: Currency Intervention and Trade Imbalances March 2013

Policy Brief 12-25: Currency Manipulation, the US Economy, and the Global Economic Order December 2012

Working Paper 12-19: The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go? October 2012
Revised August 2013

Policy Brief 12-7: Projecting China's Current Account Surplus April 2012

Working Paper 12-4: Spillover Effects of Exchange Rates: A Study of the Renminbi March 2012

Book: Flexible Exchange Rates for a Stable World Economy October 2011

Policy Brief 10-24: The Central Banker's Case for Doing More October 2010

Policy Brief 10-26: Currency Wars? November 2010

Book: Debating China's Exchange Rate Policy April 2008