| A forthcoming paper in the Journal of Development Economics looks at the dollar’s ascendancy to global reserve currency. Barry Eichengreen, of the University of California, Berkeley, and two economists from the ECB up-end the conventional history of when the dollar became top dog.
Economic historians have typically believed that until the second world war the British pound sterling remained the leading international currency. The system was geared in favour of sterling, the argument goes: bankers instinctively used the pound because everyone else did. Economists refer to this as inertia. An extension of this logic is that there can be only one major international reserve currency—in the same way that Blu-ray discs, not HD DVDs, came to dominate the high-definition video market. It's easier if everyone uses the same thing...............................................Full Article: Source
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