The Triffin Dilemma Again

19 Pages Posted: 18 Dec 2010

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of its double role of national and international currency. This is what I call the Triffin dilemma, an ever green concept in international finance. In the paper I show how it works through three examples: price of commodities, dollarization, and the international financial position of the US. I argue that to solve this situation, it would be important to create a more democratic monetary system, in which all the countries have a decision weight. In particular, I think that globalization and regionalization should be the two forces leading towards the new monetary system. The main economies should adopt the same currency through a system of fixed exchange rates (global money); developing countries should create regional monetary unions (regional money), preserving the real exchange rate as real shock absorber, but gaining in terms of time consistency and credibility.

Keywords: Triffin dilemma, global currency, regional monetary union, dollarization

JEL Classification: F33

Suggested Citation

Campanella, Edoardo, The Triffin Dilemma Again (2009). Economics Discussion Paper No. 2009-46. Available at SSRN: https://ssrn.com/abstract=1726749 or http://dx.doi.org/10.2139/ssrn.1726749

Edoardo Campanella (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

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