Monetary Authority

Power is a fundemantal concept in social science. In human history, the essence ofpower remains unchanged, but the manifestation of power has been changing alongwith time and space. In the second half of the twentieth century, the financialglobalization made power characteristic of finance. As a result, monetary power hasstood out as one of the most representative forms of power in the current worldsystem. Based on the previous research, the dissertation focuses on the theory andpractice of monetary power in its definition, acquisition, mechanisms, influences, andevaluation.The body of the dissertation is divided into five chapters. The contents of each chapterare listed as follows:The first chapter defines the concept of monetary power. A state (or a union of states)which issues a major international currency possesses monetary power. Monetarypower has two dimensions. One is a state’s ability to exercise its own policyindependence; the other is a state’s ability to influence the policy of other states.The second chapter discusses the acquisition, mechanisms and influences of monetarypower. Strong economy, mature financial markets, and solid regional foundations arethe foundations of monetary power. Currency internationalization and powerinstitutionalization are the ways to acquire monetary power. A state exercises itsmonetary power by manipulating currency use and value. Having the power toinfluence rulemaking helps a state influence the formation of monetary institutions.Having the power to influence economic theories helps a state influence the choice ofinstitutions. The stronger one in a monetary relationship influences the weaker oneand gets benefits from the weaker one mainly by taking advantage of the asymmetricstrengths in the international monetary system. The third chapter discusses the evaluation of monetary power. The dissertationevaluates monetary power both qualitatively and quantitatively. The qualitativeevaluation is based on the two dimensions of monetary power defined by Cohen. Themonetary power of the U.K. under the Gold Standard system, and the U.S. under theBretton Woods system and Jamaica monetary system are evaluated from thedimensions of autonomy and influence. The quantitative evaluation is based o n thevariance analysis in a vector autoregression model. The monetary power ofmajor-international-currency issuers under the floating exchange rate regime areevaluated quantitatively.The fourth chapter discusses a typical example of monetary power, the dollarhegemony. The monetary power of the U.S. is analyzed according to the frameworkdeveloped in the second chapter, i.e. its foundations, acquisition, mechanisms,influences and challenges.The fifth chapter discusses suggestions for China. China has been suffering from theexploitation of the U.S. monetary power, because China depends more heavily on thecurrency and finance of the U.S. than the U.S. on China. The U.S. exercises themonetary power over China, taking wealth out of China and deflecting the costs ofhegemony to China. In order to protect its national interest, China should take activemeasures to acquire and improve its monetary power by consolidating the foundationsof monetary power, promoting the RMB internationalization and playing an activepart in designing international institutions.