Journal Article

No. 2010-25 | September 01, 2010
The Triffin Dilemma Again PDF Icon
(Published as Policy Paper)

Abstract

Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar’s double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the international financial position of the US. And it makes a proposal to solve these issues, creating a more stable monetary system. In particular, it suggests the creation of an international monetary system of block regional currencies. Globalization and regionalization should be the two forces leading towards the new monetary system. The US and Europe should consider to adopt the same currency through a system of fixed exchange rates (global currency). This currency should perform its duty of anchor of the system, reducing global imbalances and gyrations in price of commodities. Developing countries, by contrast, should create regional monetary unions (regional currencies), preserving the real exchange rate as shock absorber, but gaining in terms of time consistency and credibility.

JEL Classification

F33

Citation

Edoardo Campanella (2010). The Triffin Dilemma Again. Economics: The Open-Access, Open-Assessment E-Journal, 4 (2010-25): 1—18. http://dx.doi.org/10.5018/economics-ejournal.ja.2010-25

Assessment

Downloads: 3126 (Journalarticle: 1991, Discussionpaper: 1135)
external link Search this article at Google Scholar



Comments and Questions


Jiddah M.A. Ajayi - triffin
September 05, 2010 - 22:30

this is an insightful,considerate,balanced,and fair paper.I strongly (as an economist)believe the substance of this paper. For developing countries ti grow in real terms,a strong,and stable currency is most fundamental,i recomend this paper strongly!!!.