Currency and state power

Abstract

The purpose of this essay is to examine the effect of an international currency on state power. The discussion begins with a review of the aspects of state power that seem most relevant in the context of international monetary relations, thus setting the issue within a firm analytical framework. Emphasis is placed on disaggregating the concept of currency internationalization into the separate roles that an international money may play. Analysis then focuses on three specific questions: What is the effect on state power of each specific role, considered on its own? Are there interdependencies among the various roles? And are what are their relative or cumulative impacts? In the end, three roles appear to be of paramount importance: a money’s role in financial markets, trade, and central-bank reserves. Other roles have little or no effect on the distribution of state power.