Edited by Thomas Oatley and W. Kindred Winecoff
Chapter 3: The political economy of currency internationalization
The international standing of currencies forms a principal characteristic of the international monetary order by influencing the economic and political relationships among states. Despite their great impact on the world political economy, however, and with a few notable exceptions (see e.g. Kirshner 1995; Cohen 1998), political economists have paid relatively little attention to international currencies. Economists, in contrast, initiated extensive debate about the dollar's future as the dominant international currency as early as the late 1960s. Similar controversies have emerged each time the dollar has lost substantial value, with particular intensification since the launch of the euro in 1999. The corresponding lack of interest in international currencies among political economists is a bit odd, considering that one of the founding studies for international political economy as an academic discipline, Susan Strange's (1971) Sterling and British Policy, focused on the political economy of international currencies. The outbreak of the global financial crisis of 2008 has reignited vibrant debate over the global monetary order, however, and this time political economists are active participants. The debate began with competing future prospects for the current dollar-centered international monetary system, as the financial crisis originated in the United States (US) and US crisis management policies had stirred strong concerns about the dollar's future. The subsequent European debt crisis cast a shadow over the euro's challenge. In the meantime, the Chinese government has begun to internationalize its currency, the renminbi, generating intense debate over the feasibility of that objective.
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