Currency hierarchy and the nature of peripheral currencies’ internationalization

Currency internationalization, often defined by the use of a local currency beyond the national frontier, has been a topic widely discussed in the literature. The recent rise of currencies from emerging market economies in the international market has suggested that some peripheral currencies have become more internationalized. However, their position in the currency hierarchy, which is formed by the US dollar at the top and other central currencies in an intermediate position, has remained the same. This paper investigates the different types of currency internationalization, which are reflected in the currency hierarchy, and adopts a Post-Keynesian perspective to shed light on the subordinate position of peripheral currencies in the International Monetary System. We suggest that emerging market currencies are mainly internationalized as a speculative investment currency, which reinforces their subordinate position in the currency hierarchy.