Replacing the Dollar in International Payments: A Preliminary Assessment

Abstract

This paper examines the different issues and limits involved in the process of replacing the US dollar in a sizeable share of international transactions. One specific transaction, the payment of trade in goods, receives special attention. It also dwells on other important currency flows, discussing likely evolutions and pointing out the scarcity of data for effective evaluations of most cases. After outlining the complex array of changes involved in the overall replacement, a preliminary quantitative assessment of the prospects for the trade in goods payments is made. Results signal the possibility of attaining replacement shares of 40 and 35%, for total export and import flows, respectively. Other complementary measures and questions regarding international reserves, global clearing systems, and plastic or similar means for individual across-the-border settlements are addressed. The importance of a coherent and significant group of pro-replacement countries is highlighted, BRICS standing as the main candidate. The whole movement is a geopolitical decision: its limits, uncertainties, and purpose must always be kept in mind.