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Currency Usage for Cross Border Payments
Author:
Hector Perez-Saiz https://isni.org/isni/0000000404811396 International Monetary Fund

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https://orcid.org/0000-0001-6376-636X
,
Ms. Longmei Zhang
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, and
Roshan Iyer
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 072
Language:
English
Publication Date:
24 Mar 2023
DOI:
https://doi.org/10.5089/9798400235375.001
ISBN:
9798400235375
ISSN:
1018-5941
Pages:
28
Keywords:
Cross border payments; Swift; currency dominance; legal tender; international monetary system (IMS); currency usage; legal tender status; panel of currency; Cross border; data base; Currencies; International monetary system; Financial sector development; Digital currencies; Portfolio investment; Global; Africa; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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While the global usage of currencies other than the U.S. dollar and the euro for cross-border payments remains limited, rapid technological (e.g. digital money) or geopolitical changes could accelerate a regime shift into a multipolar or more fragmented international monetary system. Using the rich Swift database of cross-border payments, we empirically estimate the importance of legal tender status, geopolitical distance, and other variables vis-à-vis the large inertia effects for currency usage, and perform several forecasting simulations to better understand the role of these variables in shaping the future payments landscape. While our results suggest a substantially more fragmented international monetary system would be unlikely in the short and medium term, the impact of new technologies remains highly uncertain, and much more rapid geopolitical developments than expected could accelerate the transformation of the international monetary system towards multipolarity.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund