International monetary hierarchy through emergency US-dollar liquidity: A key currency approach

The notion that the international monetary system is hierarchical has become increasingly common, but nature, causes, and shape of hierarchy remain vague. In this article, we develop a theory based on “key currency” approach. We perceive as world-spanning payment inherently because it needs central nodes for clearing settlement. centrality US-Dollar (USD) global key currency places US at apex makes Federal Reserve (Fed) system’s hierarchically highest institution. Other jurisdictions are pushed into peripheral positions rely both using creating USD-denominated credit money instruments “offshore.” Based approach, explain through different mechanisms to supply emergency USD liquidity from Fed non-US banks. Currently, there three public banks access Fed’s balance sheet attain liquidity. first-layer periphery may receive via bank swap lines. second-layer can make use new repo facility Foreign International Monetary Authorities residual mechanism third-layer Special Drawing Rights system, administered by Fund, in which Exchange Stabilization Fund acts gatekeeper Fed.