%0 Journal Article %J Quarterly Journal of Economics %D 2018 %T A Model of the International Monetary System %A Emmanuel Farhi %A Matteo Maggiori %X

We propose a simple model of the international monetary system. We study the world supply and demand for reserve assets denominated in different currencies under a variety of scenarios: a Hegemon vs. a multipolar world; abundant vs. scarce reserve assets; a gold exchange standard vs. a floating rate system. We rationalize the Triffin dilemma, which posits the fundamental instability of the system, as well as the common prediction regarding the natural and beneficial emergence of a multipolar world, the Nurkse warning that a multipolar world is more unstable than a Hegemon world, and the Keynesian argument that a scarcity of reserve assets under a gold standard or at the zero lower bound is recessive. Our analysis is both positive and normative.

%B Quarterly Journal of Economics %V 133 %P 295-355 %G eng %N 1