Has the global financial crisis been bad news for the world’s reserve currency? This column argues that it needn’t be, citing the rise of sterling as a global currency after the financial crisis of 1866.

If history is any guide, the Chinese renminbi will soon be due to overtake the US dollar, just as the dollar replaced the pound sterling last century. But will the renminbi be ready for reserve currency status? This column discusses the issues at hand and explains why some experts would prefer the IMF’s Special Drawing Rights as the next global reserve currency.

In a new financial landscape in which leverage is limited by worldwide regulation and the gradual digestion of toxic assets will weigh on bank’s balance sheets, the US will face tougher terms to finance its external imbalance. Perfectly at odds with the global imbalance premonitions of the early 2000s, the dollar’s weakness will likely be the best gauge of the turnaround of the global crisis.

Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data and substantially larger in disaggregated studies. This column reconciles those facts by taking into account the heterogeneity of goods. A better estimate of the aggregate elasticity of substitution is twice the conventional value – suggesting that the US dollar need not depreciate as much as usually thought to reduce the US current account deficit.

The development theme in the Global Crisis Debate has elicited many important and novel contributions on what the crisis means for the developing world and how developing nations should react. This column provides a synthesis and commentary of the key proposals.

To pay for its current account deficit and capital exports, the US needs $2 trillion of additional foreign investment in 2008. Recent research shows that the quality and depth of US capital markets are key to attracting such investment, but the subprime crisis has raised doubts. A judicious regulatory reaction to the subprime crisis will thus be critical to the value of the dollar. If the US imposes a massive increase in poorly thought-out regulation, the dollar could quickly return to its downward spiral.

The euro may surpass the dollar in coming decades to become the leading international currency. This column summarises four major challenges that the euro must survive for that to come true.