A handful of currencies, especially the US dollar, play a dominant role in international trade. We survey the active theoretical and empirical literature that documents patterns of currency use in global trade, the implications of dominant currencies for international transmission of shocks,...

The organization of this paper is as follows. Section I builds an empirically implementable model of the current account. Likewise, Section II derives the essential time series properties of the real exchange rate. Positive implications of the intertemporal approach against panel and...

Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer's currency or in local currency. We model instead a 'dominant currency paradigm' for small open economies characterized by three features: pricing in a...