Reserve currencies: Can multiplicity work?

The paper analyzes the potential rise of new reserve currencies in the context of the economic and political determinants of an international currency. Two models analyze the role of soft political power, switching costs to a new currency and transaction costs in the rise of a new currency. Quantitative indices are developed to measure these factors, which are then empirically tested and found to be statistically significant in determining the rise of international currency. The study further explores the greater use of Renminbi in East Asia and the trade integration in this region.