Atlas constrained

The US external balance sheet and international monetary power

Abstract

We address the impact on international monetary power of the size and nature of the US's international financial assets and liabilities. Financial globalization makes critical a focus on a nation's international financial assets and liabilities, its ‘external balance sheet’. We suggest an expansion of Cohen's existing framework of international monetary power to include the implications of valuation changes in these external balance sheets, focusing on sources of valuation, sensitivity and vulnerability of the US economy to these changes and implications for US ability to use monetary statecraft. By focusing on developments since 2007 and on events over the financial crisis period, we show that the increased size and nature of the US's external balance sheet has reduced US autonomy and monetary power. Underpinning the changes in the US's external balance sheet are activities of private financial market actors whose influence in international monetary affairs has grown markedly.

Peer-reviewed article by Dr. Iain Hardie & Prof. Sylvia Maxfield published by the Review of International Political Economy. Philipp Requat provided research assistance to the overarching project of the University of Edinburgh and Providence College which resulted in the publication between June 2015 and January 2016. Deliverables included data collection on the Net International Investment Position (NIIP) of the United States, Germany, France, the United Kingdom and Japan to examine and analyse their respective experiences of current account adjustment. Additionally, he conducted qualitative and quantitative research into the economic history of sterling pound as a reserve currency and wrote a 15,000 word draft book chapter on the subject.