What is meant by de-dollarisation in the global economy? Identify the key economic and financial factors driving this trend. Bring out its implications for global financial stability
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Q4. What is meant by de-dollarisation in the global economy? Identify the key economic and financial factors driving this trend. Bring out its implications for global financial stability. (15 M)
Difficulty Level: Medium
Reference: IE
Why the question Recent shifts in global reserve composition, rising gold accumulation by central banks, and evolving patterns in international finance affecting global stability. Key Demand of the question The question requires explaining the concept of de-dollarisation, identifying the major economic and financial drivers behind this trend, and examining its implications for global financial stability. Structure of the Answer Introduction Briefly set the context of changes in the international monetary system and the growing emphasis on reserve diversification and risk management. Body Explain what de-dollarisation means in terms of declining reliance on the US dollar across reserves, trade, and financial assets. Identify the key economic and financial factors driving the trend, such as reserve diversification, monetary spillovers, asset safety concerns, and alternative settlement mechanisms. Bring out the implications for global financial stability, including resilience gains, transition risks, and liquidity fragmentation. Conclusion Conclude by emphasising that de-dollarisation reflects a gradual adjustment rather than a breakdown of the global monetary order, highlighting the need for coordinated financial governance.
Why the question
Recent shifts in global reserve composition, rising gold accumulation by central banks, and evolving patterns in international finance affecting global stability.
Key Demand of the question
The question requires explaining the concept of de-dollarisation, identifying the major economic and financial drivers behind this trend, and examining its implications for global financial stability.
Structure of the Answer
Introduction Briefly set the context of changes in the international monetary system and the growing emphasis on reserve diversification and risk management.
• Explain what de-dollarisation means in terms of declining reliance on the US dollar across reserves, trade, and financial assets.
• Identify the key economic and financial factors driving the trend, such as reserve diversification, monetary spillovers, asset safety concerns, and alternative settlement mechanisms.
• Bring out the implications for global financial stability, including resilience gains, transition risks, and liquidity fragmentation.
Conclusion Conclude by emphasising that de-dollarisation reflects a gradual adjustment rather than a breakdown of the global monetary order, highlighting the need for coordinated financial governance.