Commentary Type

The International Monetary System and Global Imbalances

Edwin M. Truman (Former PIIE)

Paper based on remarks delivered at the December 15, 2009, conference "The International Monetary System: Looking to the Future and Lessons from the Past," sponsored by the International Monetary Fund and the UK Economic and Research Council


In the aftermath of the global economic and financial crisis of 2007-09 and in the context of ongoing debates about the role of global imbalances as a cause of that crisis, attention has reverted to the desirability of reforming the international monetary system. This paper argues that today’s international monetary system is not uniquely prone to global current account imbalances even though they pose potential problems for the stability of the international economy and financial system. The US dollar is not the only reserve currency. Its broader role as an international currency is much more important than its role as a reserve currency. Moreover, the US dollar’s international role in either form does not force the United States to have current account deficits. The international monetary system should continue to evolve with the international financial system, but the case for radical reform has not been made.

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