Ekonomik Yaklaşım, Cilt : 22, Sayı : 78, ss. 137-154
DOLLAR AND ITS ALTERNATIVES AS A
RESERVE CURRENCY
Aykız DOĞAN 
Abstract
This paper provides an evaluation on the global reserve currency status of
U.S. dollar and the debates on reserve currencies. This evaluation involves the
examination of some quantitative data concerning the economic facts of the leading
countries, the currency composition of foreign exchange holdings in the world and
the official reserve assets of the major reserve-accumulating countries. Furthermore
it calls attention to the criticisms towards the viability of the dollar as a global
reserve currency and analyzes the suggestions and ideas proposed by countries and
county groups.
Keywords: Global Reserve Currency, Reserve Assets, U.S. Dollar, Foreign
Exchange Holdings.
JEL Classification: F31, F33, F36.
Uluslararası Rezerv Olarak Dolar ve Alternatifleri
Özet
Bu makale A.B.D dolarının küresel rezerv para statüsü ve rezerv para
birimleri hakkındaki tartışmalar üzerine bir değerlendirme sunmaktadır. Bu
değerlendirme önde gelen ülkelerin ekonomik gerçeklerine, dünyadaki döviz
stoklarına, özellikle de başlıca rezerv ülkelerinin resmi döviz varlıklarına ilişkin
nitel verilerin incelenmesini içermektedir. Ayrıca doların rezerv para olarak devam
etme kapasitesine yönelik eleştirilere dikkat çekmekte ve çeşitli ülkelerin ve ülke
gruplarının görüş ve önerilerini ele almaktadır.
Anahtar Kelimeler: Küresel rezerv para, döviz varlıkları, A.B.D. doları,
uluslararası döviz rezervleri.
JEL Sınıflaması: F31, F33, F36.

Ankara Üniveritesi, Sosyal Bilimler Enstitüsü.
Aykız DOĞAN
138
1. Introduction
Countries have used reserve currencies for international transactions
throughout the history. Foreign currency assets are both a store of value and a liquid
instrument to finance debt. For central banks they are tools for monetary policies as
well as exchange rate policies. Furthermore the financial crises of capitalism have
shown that foreign exchange reserves can be a kind of insurance policy against
economic instability. The question is which currency is best to be used as an
international reserve currency? That is, which currency can secure global economic
stability and at the same time preserve the value of the liquidity of the countries and
institutions?
During the course of the World War 2, Keynes considered this issue and
came up with the idea of the “Bancor”. The Bancor was an international currency
unit to be used in all of the international transactions. Keynes has also proposed a
new institution called the International Clearing Unit which would control the
supply of the Bancor serving as world’s central bank. It would promote global trade
balance by financing the trade deficits of countries by the trade surpluses of others.
However his idea was rejected. Instead it was decided that US economy was strong
enough to supply its national currency, the dollar, to function as the global currency.
Hence in the Bretton Woods agreement in 1944, the U.S. dollar became the
reserve currency of the world. Countries retained fixed exchange rates against the
dollar which in turn was pegged to gold. However, the system was meant to fail as a
result of a dilemma theorized by the economist Robert Triffin (1960) and therefore
has been called “Triffin’s dilemma” ever since. Briefly, U.S. whose national
currency was the reserve currency of the world, had to run a balance of payments
deficit to provide the liquidity that the growing global economy needed and at the
same time maintain a balance of payments surplus or at least a balanced budget to
protect the confidence in its currency (Triffin, 1960).
Simply, it was impossible. U.S. dollars were flowing out of the country as a
result of the imports, war spending and economic aids such as the Marshall Plan.
Soon it was understood that the dollar was overvalued with respect to gold.
Decreasing its deficit by a contractionary monetary policy was not a solution since it
would lead the country and eventually the world into a recession.
Finally in 1971 President Nixon ended the convertibility between US dollars
and gold (known as the Nixon shock). Since then, neither US dollars nor other
currencies are convertible into gold from official gold reserves and fixed exchange
rate regimen is replaced with floating exchange rate regime. Nonetheless the global
reserve currency status of the dollar survived.
Dollar and its Alternatives as a Reserve Currency
139
On the other hand, there are debates about the global reserve currency and
strong criticisms directed to the domination of the U.S. dollars. Most of these
criticisms are underpinned by the rise in US budget deficit and the economic
advantages that the U.S. has benefited, thanks to the dollar’s special status.
Furthermore the changing global economic order with the rise of certain economies
is now offering some other alternatives.
This paper will focus on the “global reserve currency” issue and argue the
future viability of U.S. dollars as a global reserve currency. First it will discuss
dollar’s role as a global reserve currency and the current economic challenges
regarding the ideas and theories of related economists. Then it will analyze the
foreign currency holdings of countries by providing quantitative data based on IMF,
World Bank and CIA statistics. It will try to outline the essential criticisms on the
domination of U.S. dollars and consider other currency alternatives offered by some
of the countries and country groups.
2. A Brief Review of the Ideas of the Economists on Reserve Currencies
According to Paul Krugman (1984) the dollar plays different roles as a global
reserve currency. First of all it is a vehicle currency for transactions. Secondly it is
the intervention currency for central banks. Thirdly, it is the dominant currency for
international lending and borrowing. Fourthly, there are still few countries whose
currencies are pegged to the dollar. Fifthly, dollars in New York and Eurodollars in
London constitute the main liquid international asset. And lastly, the dollar accounts
for the bulk of nongold reserves (p. 264).
Krugman (1984) calls attention to the disadvantage of the dollar as a store of
value because of the uncertain exchange rates. According to Krugman (1984) this
uncertainty results in a trend towards diversification (p. 276).
Nobel Prize - winning economist Joseph Stiglitz also said at a conference that
the dollar’s role as a good store of value is questionable and the currency has a high
degree of risk. He mentioned the need for a new global reserve system (Chen, 2009).
C. R. Schenk (2009), from University of Glasgow, has focused on how
reserve currencies emerge and how they can be replaced by examining the case of
sterling in the post-war decades. She supports the idea that more than one major
reserve currency could operate at the same time by considering how sterling
continued to serve as a secondary international currency after the end of the 2nd
World War. Schenk (2009) suggests that the current global reserve system under
which the US dollar acts as the primary international reserve asset, not only
contributed to the current global crisis, but also continues to pose a threat to future
Aykız DOĞAN
140
stability. However the gradual trends towards the replacement of the dollar by the
euro requires more deliberate management to avoid a landslide effect.
Ocampo1 (2010) suggests a more fundamental reform. First of all he points
out that since the abandonment of the gold standard in 1971, world’s reserve
currency has no backing except the trust in the government that issues the currency.
Moreover the major currency as well as its alternatives, lacks a stable value.
According to Ocampo (2010) this system not only contributes to the generation of
payment imbalances over the world but also creates an unfair situation for the
developing countries. The obligation of self protection against financial crisis
compels these countries to accumulate their reserves in assets issued by the major
industrial countries, which essentially means lending to rich countries at low interest
rates.
Rodrik (2006), who is a professor of international political economy at the
Harvard University, has focused on the costs of the foreign reserve accumulation in
developing countries. Rodrik (2006) calls attention to the rapid rise in foreign
reserves, which have climbed to almost 30% of developing countries’ GDP, since
1990’s.
European Central Bank experts2 as well as the International Monetary Fund
staff have also studied the subject. For instance, the analysis of Lago, Duttagupta
and Goyal (2009) considers a connection between the global crisis and the setup
with a dominant country-issued reserve currency.
3. The Dollar as the Major International Reserve Currency
According to the IMF (2009a) estimates for 2009 which are summarized in
Table 1, approximately 62% of the world’s currency reserves are held in U.S.
dollars. Although euro is preferred by some countries for certain transactions and
also used as a reserve currency, Table 1 demonstrates how huge the difference is
between the Euro holdings and the Dollar holdings as foreign exchange.
1
Ocampo is a professor, Director of the SIPA Economic and Political Development Concentration and
co-President of the Initiative for Policy Dialogue at Columbia University and was formerly UnderSecretary General of the United Nations for Economic and Social Affairs, Executive Secretary of the
Economic Commission for Latin America and the Caribbean, and Minister of Finance of Colombia.
2
See European Central Bank (2006) for a detailed analysis of accumulation of foreign reserves in the
world.
Dollar and its Alternatives as a Reserve Currency
141
Table 1: Currency composition percentages of the foreign exchange
holdings in the world in 2009
World
Advanced
economies
Emerging &
developing
economies
Claims in U.S. Dollars (%)
61.6
65.4
57.5
Claims in Euros (%)
27.7
24.5
31.4
Claims in Pounds Sterling (%)
4.3
2.8
6.0
Claims in Japanese Yen (%)
3.2
4.4
1.9
Claims in Other Currencies
2.9
2.7
3.2
Source: These values are calculated according to the 2009 third quarter preliminary data of the
IMF statistics (2009a).
The currency composition percentages in Table 1, point out that the dollar is
currently the global reserve currency. It means that the dollar is the most widely
used international reserve asset by the governments to pay off their international
debt obligations and to influence domestic exchange rates when necessary. World’s
transactions across borders including not only the capital flows but also trade of
goods and services that occupy a large share in international trade such as gold and
oil are mostly denominated in U.S. dollars. And hence, not only governments but
also institutions such as banks prefer to hold U.S. dollars as a significant part of their
foreign exchange reserves.
The United States who has been serving as custodian for the global reserve
currency enjoys an economic privilege. However, the responsibility that U.S. has to
bear is huge. It has to enhance global financial stability. But more importantly it has
to meet the growing demands of the world markets for the dollar liquidity in order to
prevent a liquidity crisis such as the one that occurred in the 1970s. This means that
U.S. has to confront inflationary pressures at home and incur a large deficit, while
the fate of this deficit remains unknown.
4. Arrival of the Euro as the Major Competitor to the Dollar
When the economic depressions and instabilities of the early 20th century
showed that the modern international banking system required a regulated
international money market and a reserve currency, US was the single, dominant
economic power. Europe was struggling to pay its war debts and was under the
Aykız DOĞAN
142
threat of totalitarian regimes when the Bretton Woods Conferences have taken place.
However, Europe area, Japan and newly industrialized countries such as China
began to gain economic influence in the world markets at the end of the 20th century.
As these economies share more economic power today, the hegemony of the U.S.
dollar as the sole world reserve currency seems to lose ground.
Table 2 shows the largest economies of the world with their contribution to
the world GDP. It is evident that none of the member countries of European Union
can compete with the US alone, but together they build up a strong and highly
competitive economy which has proved a relative economic stability over years.
According to IMF (2009b) estimates for 2009 GDP of European Union which is
approximately 16 trillion$ E.U. has the largest share in the world GDP (57 trillion$)
leaving the U.S. (14 trillion$) behind. Table 2 indicates there is a decline in the
share of the U.S. in the world GDP since 2002 while EU maintains a sustainable
economy. It also demonstrates that the other leading economies such as Japan and
China occupy only a small share in world GDP compared to European Union and
U.S.
Table 2: Percentage Contribution to World GDP (2000-2009)
1999
US
30%
EU
29%
Japan 14%
China 3%
UK
5%
2000
31%
26%
15%
4%
5%
2001
32%
27%
13%
4%
5%
2002
32%
28%
12%
4%
5%
2003
30%
31%
11%
4%
5%
2004
28%
31%
11%
5%
5%
2005 2006 2007 2008 2009
28% 27% 25% 24% 25%
30% 30% 31% 30% 28%
10% 9% 8% 8% 9%
5% 5% 6% 7% 8%
5% 5% 5% 4% 4%
Source: These values are calculated according to the IMF statistics of GDP in current billion
dollars (IMF, 2009b).
Furthermore Table 3 demonstrates that the world merchandise and service
trade is dominated by the European Union and not by the U.S. In this table the extraEU trade doesn’t include the intra-EU trade which has approximately 4% share in
world trade according to the World Trade Organization statistics (2009: 12-15).
Evidently, EU is both the biggest exporter and importer in world trade.
Dollar and its Alternatives as a Reserve Currency
143
Table 3: Percentage shares of the leading exporters and importers in world
trade in 2008
Extra-EU
US
China
Japan
Merchandise
Exports
Imports
15.9
18.3
10.6
17.4
11.8
9.1
6.5
6.1
Service
Exports
26.9
18.8
5.3
5.3
Imports
23.9
14.2
6.1
6.4
Source: World Trade Organization Statistics, 2009, p. 12-15.
These economic facts make the euro a viable candidate to compete with the
dollar. As a matter of fact, the percentage share of claims in euro in the total foreign
exchange holdings has displayed an increasing trend over the last decade (Table 4).
According to Table 4 the Euro holdings rose since 2000 from 18% to 28%.
However this improvement in euro doesn’t mean that it is becoming a
dominant reserve currency. The fragmented composition of European Union with
different governments raises concerns on the strength of the euro liquidity. Euro
zone is still not considered as strong as U.S. to provide the liquidity demanded in the
world. U.S. dollar maintains its dominance as a reserve currency. Moreover the
collapse of Greek economy raises questions on the sustainability of the euro as well
as the recent worries on the economic performances of Spain and Portugal. There
are even speculations on the risk of a collapse of euro and even of the European
Union itself.
In this regard the euro doesn’t seem to be a viable candidate to replace the
dollar. Table 4 indicates a decline in the dollar holdings, but still over a half of the
foreign exchange holdings are claimed in U.S. dollars while claims in euros don’t
even get close.
Table 4: Currency composition percentages of the foreign exchange holdings
in the world between 2000 and 2009
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
Claims in U.S. dollars (%)
71.1 71.5 67.1 65.9 65.9 66.9 65.5 64.1 64.2 61.6
Claims in pounds sterling (%)
2.8
2.7
2.8
2.8
3.4
3.6
4.4
4.7
4.1
4.3
Claims in Japanese yen (%)
6.1
0.5
4.4
3.9
3.8
3.6
3.1
0.3
3.1
3.2
Claims in euros (%)
18.3 19.2 23.8 25.2 24.8 24.0 25.1 26.3 26.4 27.7
Claims in other currencies (%) 1.7
6.1
1.9
2.2
2.1
1.9
1.9
4.6
2.2
3.2
*
Third quarter preliminary
Source: These values are calculated according to the IMF statistics, COFER, (IMF, 2009a).
Aykız DOĞAN
144
Nevertheless the decline in the dollar denominated assets from 71% to 61%
(Table 4) should not be underestimated since it calls attention to the debates on the
dollar’s future viability as the global reserve currency.
5. The Facts behind the Concerns on the Viability of U.S. Dollars as a
Global Reserve Currency
The reserve currency debate has been going on since at least five years.
However the current global recession also brought some consequences to the
markets and eroded the confidence in U.S. economy. The recent cautions and
policies implemented by the US to cope with the crisis brought a larger deficit to
U.S. and a higher dollar supply to the markets. Furthermore the so called ‘stability’
of the dollar collapsed.
According to Whitehouse budget report, gross federal debt has reached to
12.867.455 million dollars corresponding to 90% of the Gross Domestic Product in
2009 (White House, 2009: 21-27). As seen in Chart 1 there is a sharp increase in
the U.S. debt as a percentage of GDP especially in the last three years. The record
high debt of U.S. raises concerns and fuels the criticisms on U.S. spending
especially after the Iraq war.
Chart 1: U.S. Gross Federal Debt as Percentage of GDP
Source: This chart presents the plot of the data from White House Office of Management and
Budget, 2009, p. 21-27.
The most concerned countries are the major reserve nations such as China,
Russia, India and Brazil. Because these countries’ national wealth is tied up mostly
in dollar assets and hence is very sensitive to the decline in the value of the dollar.
Dollar and its Alternatives as a Reserve Currency
145
Figure 1: U.S. Dollar index (2002-2009)
Source: Fxstreet (2010).
The declining trend of the U.S. dollars which is demonstrated in Figure 1
justifies the complaints of the reserve holders. U.S. has to pay attention to the
complaints, because these countries’ reserve assets correspond to the US external
debt since a significant part of their reserves are composed of US Treasury
Holdings. Chart 2 shows the major foreign holders of U.S. treasury securities. The
country groups demonstrated in the chart hold more than 70% of the U.S. treasury
securities.
Chart 2: Major foreign holders of U.S. treasury securities, 2009
Oil Exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar,
Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
Caribbean Banking Centers include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles,
Panama and British Virgin Islands.
Source: This chart is designed based on the data from Department of the Treasury (2010).
146
Aykız DOĞAN
According to Chart 2 which is based on the statistics of U.S. Department of
the Treasury, China and Japan are the largest holders of U.S. treasury securities.
According to the CIA statistics which are summarized in the first column of Table 5
these two countries are world’s biggest holders of foreign exchange reserves. The
sum of their percentage shares is as high as 40% of the world total.
6. Proposals for a New International Currency and Other Local
Solutions
China who holds the largest foreign exchange reserves at approximately $
2.206 trillion according to 2009 estimates (Table 5) and finances an important part
of the U.S. debt (Chart 4), has been consistently complaining about the instability
of the dollar. At the end of 2008, China started negotiations with some of her
neighbors including Brazil and Russia for settling trade in yuan. On March 2009,
the People’s Bank of China released a statement by Zhou Xiaochuan, the Central
Bank’s governor, on reforming the international monetary system. In this statement
Xiaochuan asserted that Triffin dilemma still exists and pointed out the tendency of
the dollar to deflate in the long run. The solution proposed by Xiaochuan, was same
with the one proposed by J. M. Keynes in 1940s: a super sovereign reserve currency
managed by a global institution (see; Xiaochuan, 2009). According to the Central
Bank’s statement, SDRs3 that are currently being issued by the IMF has the potential
to act as a reserve currency (Global Research, 2009).
After a few months, IMF emphasized a possibility of creating a new global
currency to replace the dollar over time. The First Deputy Managing Director John
Lipsky also mentioned that IMF’s “Special Drawing Rights” (SDRs) could be used
as the basis for a new currency. But obviously SDRs should become more liquid and
open to private trading first. For the time being SDRs are only traded among
governments and central banks (The Economist Intelligence Unit, 2009a).
Moreover the calculations made in the Table 5 according to the data
available for the largest reserve holders of the world indicate that SDRs are not
really popular. Table 5 comprises the leading reserves holders as these 30 countries
hold more than 85% of the total reserves in the world which amounts 7.734.056
million dollars for the 144 country available in CIA World Fact Book (2010). Table
3
Special Drawing Rights: International Monetary Fund created this monetary unit in 1969 in support of
the Bretton Woods System. This unit is not a currency or a claim on the IMF. SDRs represent potential
claims on the currencies of IMF members. SDRs are defined as a basket of four currencies (Euro, Yen,
Pound, Dollar). SDRs offer a low cost alternative for building reserves with an interest rate that is
computed weekly by IMF (IMF, 2009c).
Dollar and its Alternatives as a Reserve Currency
147
5 also includes IMF Data Statistics4 which demonstrates the composition of the
official reserve assets between foreign currencies, SDRs and gold. According to the
data only 4% of the total reserve assets that are listed in the table are preferred to be
held as SDRs, while 82% is preferred to be held as foreign currency reserves.
However, it should be taken into consideration that IMF data does not provide any
information on certain countries such as China or Iran. Data for many countries is
not available indicated as “NA”.
According to Table 5, only 9% consists of gold. Although gold is a good
store of value since it protects its value against inflation and other economic or
political fluctuations, it is not preferred because it is not liquid. There are opinions
and arguments that support reforming the monetary system by a return to gold (see;
Todd, 2008). However it is not a strong option since, in Ocampo’s (2010) words,
“this would be swimming against the tide of history, as the monetary history of the
world since the nineteenth century has been a movement away from gold and toward
placing fiduciary currencies at the centre of modern monetary systems” (p. 3).
SDRs are obviously not the only solution that has been suggested. For
instance Russia proposed using a mix of regional currencies, including the ruble,
could be a solution for replacing the dollar as the dominant reserve currency.
Negotiations still continue between Russia and Turkey to use Ruble and Turkish
Liras in their trade transactions. Also Russia is negotiating with other nations in the
region including Iran to trade in Rubles. Russia's trade with Western Europe and the
former Soviet states is largely in crude oil and natural gas, and Russia is insisting on
trading in euro if not in Ruble and local currencies instead of U.S. dollars. As a
matter of fact Russia has already raised the share of the euro in their reserve
portfolios after introducing a dollar-euro currency basket in 2005.
Recently in 2009, Iran has also announced that the U.S. dollar will be
replaced by the euro not only in their foreign exchange reserves but also in their oil
transactions. Iran’s aims to isolate itself out of the American banking system remind
the efforts of Saddam Hussein before the U.S. invasion.
There is also other news in the media which state that Gulf Arabs, China,
Japan, Russia and France are planning to switch to a basket of currencies including
the Japanese yen and Chinese Yuan, the euro, gold and a new, unified currency for
the Gulf nations in the pricing of oil (Fisk, 2009; Bloomberg News, 2009).
On the Latin America’s side the Bolivarian Alliance for the Peoples of our
America (ALBA) which includes nine member states, discussed to introduce a new
4
See IMF (2010).
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148
currency in its latest meeting. ALBA which includes Latin America’s leftist
governments such as Venezuela, Cuba, Bolivia, Ecuador and Nicaragua, aims to
continue their trade with this new currency. However, trade among the ALBA
members is rather small, since this group doesn’t include Latin America’s largest
economies except the oil producer Venezuela. The economic and political facts of
the region render such efforts meaningless (The Economist Intelligence Unit,
2009b).
Table 5: Official Reserve Assets and Their Composition
Reserves of
Foreign
Exchange
Including SDRs
and Gold (US
Dollars)
Official Reserve
Assets
(million US$)
Foreign
Currency
Reserves
(million
US$)
SDRs
(million
US$)
Gold
(million
US$)
NA
NA
1
China
2.206.000.000.000 NA
NA
2
Japan
1.011.000.000.000 1.053.070,00
1.001.067,97 20.787,00
26.533,00
3
Russia
439.000.000.000
439.034,23
398.870,56
8.900,56
22.381,69
4
Taiwan
341.000.000.000
NA
NA
NA
NA
5
India
282.000.000.000
283.470,00
258.583,00
5.169,00
18.292,00
6
Korea, South 245.900.000.000
NA
NA
NA
NA
7
Brazil
238.000.000.000
240.483,53
233.142,11
4.487,61
1.165,26
8
Hong Kong
206.100.000.000
255.816,00
244.922,00
9
Singapore
180.200.000.000
187.809,10
187.421,50
1.536,90
211,70
10 Algeria
149.200.000.000
NA
NA
NA
NA
11 Germany
138.000.000.000
178.717,31
37.814,34
3.372,79
18.936,50
12 Thailand
128.700.000.000
138.417,59
133.142,78
1.522,98
2.934,75
13 Italy
105.300.000.000
140.097,66
35.854,12
9.675,88
92.682,96
14 France
102.900.000.000
133.089,83
27.728,67
15.240,11
86.444,65
15 Malaysia
98.020.000.000
96.677,70
86.478,60
2.124,40
1.280,90
16 Libya
89.740.000.000
NA
NA
NA
NA
17 Mexico
89.740.000.000
99.892,98
94.089,31
4.527,24
302,39
18 Iran
81.310.000.000
NA
NA
NA
NA
19 U.S.
77.650.000.000
128.060,90
44.692,19
56.226,04
11.041,06
20 Switzerland
74.070.000.000
134.271,04
90.865,35
5.357,88
36.857,53
21 Turkey
72.700.000.000
74.824,78
69.012,75
1.515,00
4.121,03
74,00
Dollar and its Alternatives as a Reserve Currency
149
22 Poland
67.290.000.000
85.086,99
68.859,97
2.079,91
3.582,73
23 Indonesia
62.590.000.000
66.104,86
60.368,96
2.753,14
2.552,41
24 Israel
56.640.000.000
61.615,16
56.109,96
1.226,53
25 U.K.
52.980.000.000
64.295,00
35.286,00
14.220,00
26 Norway
50.950.000.000
49.186,00
37.222,00
2.602,00
27 Iraq
46.760.000.000
NA
NA
NA
NA
28 Nigeria
46.540.000.000
NA
NA
NA
NA
29 Australia
44.980.000.000
41.720,60
32.640,21
4.838,68
2.792,03
30 Canada
43.870.000.000
54.357,00
42.602,00
9.212,00
119,00
TOTAL
6.829.130.000.000 4.006.098,26
100,00%
Percentage Shares
Total of
7.734.055.820.000
144 Countries
10.758,00
3.276.774,35 177.375,65 343.063,59
81,79%
4,43%
8,56%
Source: First column of the table presents the data of the World Fact Book (CIA, 2010), while
the remaining columns comprise the data of IMF Data Statistics (IMF, 2010).
7. Conclusion
This paper has attempted to explore the questions on the global reserve
currency and analyze the general reserve currency preferences and trends in the
world by providing some relevant data. It also tried to examine the criticisms
directed to the global reserve currency status of the U.S dollar and the suggestions
offered by major reserve holder countries.
In conclusion, the dollar has not always been an ideal global reserve currency
and the reactions against the dollar are not a new phenomenon. The world has been
debating on the dollar’s role as the global reserve currency for at least five years.
Nevertheless, the recent global financial crisis has directed increasing attention
towards these debates and raised more concerns about the future viability of the
dollar.
Evidently there are countries and country groups which are not content with
the current global economic order. As there are emerging and rising economies
which gain more influence in the markets, the economic as well as political
domination of U.S. is attracting more reactions.
However U.S. is still the largest and strongest economic power and the dollar
is still the only currency that can serve as a global reserve currency. It seems hard to
replace the dollar without disrupting the stability of the global monetary system.
Aykız DOĞAN
150
Nevertheless it is a fact that countries started to prefer to diversify their
foreign exchange reserves adding more local currencies as well as the euro and
SDRs. And according to the current trend more diversification is to be expected.
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2002
2003
2004
2005
2006
2007
2008
2009
Claims in other currencies 22,034
4,372
7,314
5,016
802
43,833
559,246
89,457
102,243
49,041
683,809
4,143
101,769
145,205
59,52
831,947
5,685
102,051
192,663
170,706
5,449
131,698
192,353
4,838
143,301
75,731
87,248
129,695
1,082,276 1,112,260 1,230,570
6,395
120,48
1,093,330 1,331,015 1,721,442 2,291,897 2,698,586 3,081,152
49,865
658,531
4,419
101,787
30,391
72,801
174,242
Claims in pounds sterling
Claims in Japanese yen
Claims in euros
Total foreign exchange holdings 673,819
Emerging and developing economies
701,693
Claims in U.S. dollars
997,111
732,984
193,979
80,627
31,01
768,827
818,073
202,984
68,356
30,034
787,963
989,065
281,546
66,303
36,088
844,294
400,666
87,323
48,42
370,818
83,885
49,826
420,278
84,194
64,718
499,098
85,213
76,02
484,974
93,193
60,966
572,349
103,256
66,307
1,285,831 1,707,272 2,126,929 2,818,017 4,016,375 4,458,289 4,845,085
343,638
76,631
36,338
1,036,696 1,218,184 1,248,630 1,336,673 1,408,823 1,466,110 1,529,388
1,093,947 1,108,111 1,254,861 1,529,481 1,796,147 1,790,518 1,948,429 2,119,372 2,157,582 2,338,273
612,194
27,919
427,327
61,655
87,608
Allocated reserves
480,142
20,069
301,026
50,537
78,145
1,203,298 1,231,557 1,419,044 1,739,279 2,041,129 2,047,627 2,218,908 2,394,712 2,450,968 2,670,896
418,039
4,087
42,401
79,19
Total foreign exchange holdings 1,108,128
Advanced economies
402,242
22,672
Claims in euros
Unallocated reserves
277,693
3,172
246,95
Claims in Swiss francs
41,798
92,078
39,827
87,939
Claims in Japanese yen
1,079,916 1,122,431 1,204,673 1,465,752 1,751,012 1,902,535 2,171,075 2,641,645 2,703,311 2,734,072
Claims in pounds sterling
979,783
Claims in U.S. dollars
1,379,705
1,518,244 1,569,488 1,795,915 2,223,110 2,655,070 2,843,541 3,315,483 4,119,190 4,210,672 4,434,829
2001
Allocated reserves
2000
1,936,282 2,049,630 2,408,109 3,025,110 3,748,400 4,174,556 5,036,925 6,411,087 6,909,257 7,515,981
1999
153
Total foreign exchange holdings 1,781,947
World
Appendix: Currency Composition of Official Foreign Exchange Reserves (COFER) (In millions of U.S. dollars)
Dolar and its Alternatives as a Reserve Currency
15,138
72,708
Claims in Japanese yen
Claims in euros
424,296
83,713
11,451
10,788
311,089
461,377
98,043
10,834
12,367
334,468
541,054
145,781
11,842
14,449
360,379
693,629
215,608
10,977
25,317
429,056
858,923
257,866
14,464
41,037
532,828
Source: IMF (2009a) COFER.
Aykız DOĞAN
312,991
17,885
52,417
411,669
17,857
80,487
834,402
583,177
35,267
116,643
627,286
38,505
109,74
658,221
40,044
126,046
1,232,822 1,237,201 1,204,684
1,053,023 1,367,054 1,999,817 2,053,090 2,096,556
653,906
Unallocated reserves: This line is the difference between total foreign exchange reserves and the allocated reserves.
Allocated reserves: shows reserves data
9,436
Claims in pounds sterling
382,594
278,09
Claims in U.S. dollars
Allocated reserves
154