From: Tuesday December 3, 2019, 6:30 pm
To: Tuesday December 3, 2019, 7:30 pm
Capital flows, risky asset prices and leverage tend to comove strongly across countries so that there is a Global Financial Cycle (Rey (2013)). One important driver of the global financial cycle is the monetary policy of the US Federal Reserve which influences financial conditions around the globe. This reflects the central role of the US in the international monetary and financial system and the dominant role of the dollar as a currency in international banking, in trade invoicing and in asset markets in general.
Looking into the future, as the relative mass of the US in decreasing in the world economy and in world trade, we may see the emergence of a more multipolar international monetary and financial system where the euro area of China may play a bigger role. The potential challenges of private digital currencies may also play a catalytic role and precipitate changes.
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