An Equilibrium Model of the International Price System

What explains the central role of dollar in world trade? Will US currency retain its dominant status future? This paper develops a quantitative general equilibrium framework with endogenous choice that can address these questions. Complementarities price setting and input-output linkages across firms generate complementarities making exporters coordinate on same invoicing. The is more likely to play this because large size economy, widespread peg dollar, history dependence choice. Calibrated using tables exchange rate moments, model successfully replicate key empirical facts about use currencies at global level, countries, over time. According counterfactual analysis, other economies ensures unlikely lose falling share but be replaced by renminbi case negative shock economy. If abandoned, move new multiple regional currencies. (JEL D21, E31, E42, F14, F31, F33)