The Roles of Currencies in the Process of World Economy Globalization

For centuries, currencies have been seen; beyond their economic functions; as symbols of sovereignty. Today, in the environment of globalisation, they are often seen as symbols of the economic and financial strength of economic areas in an international context. Globalization and integration (which influence each other) substantially change economic relations: They increase trade and factor mobility between regions thereby fostering interregional competition and affecting the interregional division of labour. The process of financial globalization has brought a massive change in the economic landscape of all countries across the globe. The international role of currencies is measured by the share in global markets, in particular, in debt securities markets, international loan and deposit markets, foreign exchange markets, and international trade. The concept of the global roles of currencies combines the domestic and international (cross-border) use of currencies and therefore captures the overall importance of different currencies in a globalized economy. The measure of a currency's global role is based on the size and stage of development of the underlying economy, as well as the size and stage of development of its financial markets and the scope of financial instruments available in this currency. The quantitative results show, that the dollar is still the dominant global currency, followed by the euro. However, in comparison with the measurement based on the international debt market the yen and pound sterling switched ranks and a slightly larger global role is attributed to the yen.