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Monetary Hegemony in Asia-Pacific

Asia
China
Governance
India
International Relations
Nationalism
Power
Karina Jędrzejowska
University of Warsaw
Karina Jędrzejowska
University of Warsaw

Abstract

National monetary strength of a state allows it to influence global financial governance structures as well as achieve foreign policy goals. Strength of a currency depends upon legitimacy and strength of the issuing state. Therefore issuers of international currencies are also dominant powers in global economy and politics. For several decades the hegemony of the U.S. dollar in the global monetary system seemed undisputed. Yet with the subprime crisis and the rise of Asian emerging markets the balance of power in global monetary system appears challenged. The situation seems particularly dynamic in Asia-Pacific, where – in addition to the still dominant U.S. dollar – several pretenders to the position of a hegemonic currency can be named. These include the Japanese yen or the Chinese yuan. Moreover there are further reserve currencies in the region, such as the Australian dollar, Indian rupee, or the Korean won. The aim of the paper is to employ the concept of a currency pyramid provided by Cohen to analyse monetary relations in the Asia-Pacific region. In particular, the paper will look at the prospective monetary hegemons in the region as well as the interdependencies between the national currencies.