Eurodollar Banking and Currency Internationalization

This paper produces the first cross-country evidence on the relationship between the size of foreign exchange reserves and local currency internationalization using a sample of Switzerland, Japan and the UK. It finds that a high ratio of foreign exchange reserves to international reserves has a significant, but negative, impact on local currency internationalization during the period 1976–2009. After controlling for interest rate differential, different indicators for long-run depreciation and volatility of exchange rates, as well as the once-in-a-century global financial crisis of 2007–2009, the above conclusion still holds. Additionally, these results are robust to different methods (Pooled OLS and Pooled IV/2SLS) and measures of the scale of foreign exchange reserves. This study is informative for any policy decisions and will provide a strategic reference for the Chinese government as it optimizes the composition of its international reserves, promotes the process of renminbi (RMB) internationalization and becomes a major power through financial development.

Download Full-text

DOCTRINAL DEVELOPMENTS IN INTERNATIONAL MONEY: THE QUESTION OF CURRENCY INTERNATIONALIZATION FROM BRETTON WOODS TO THE 1970S

Journal of the History of Economic Thought ◽

10.1017/s1053837216000298 ◽

2017 ◽

Vol 39 (4) ◽

pp. 429-451 ◽

Cited By ~ 1

Author(s):

Anthony M. Endres

Keyword(s):

Twentieth Century ◽

Full Range ◽

International Currency ◽

Bretton Woods ◽

Cross Border ◽

International Money ◽

National Currencies ◽

International Currencies ◽

Currency Competition ◽

Currency Internationalization

In the Bretton Woods era the controversy over cross-border use of national monies turned on how to create ‘symmetries’ and avoid significant ‘asymmetries’ in the way national currencies shared specific international currency functions. We examine the twentieth-century work of prominent economists on the nature, choice, and functions of international currencies. Prescriptive approaches to international currency formation are considered, beginning with the discussion of the Bretton Woods plans, followed by doctrinal developments stimulated by the collapse of the Bretton Woods system. Why are those developments instructive, given recent revisitation of the currency internationalization question in modern international monetary thought and policy? The modern revival of this question resembles a rehabilitation and restatement of earlier controversies, though it underestimates the gradual encroachment of the idea of international currency competition. This idea came to dominate other doctrines from the 1970s; it accommodates the ongoing adaptation of national currencies to the full range of international currency functions.

Download Full-text

Chinese Currency Internationalization – Present and Expectations

Procedia Economics and Finance ◽

10.1016/s2212-5671(13)00189-5 ◽

2013 ◽

Vol 6 ◽

pp. 683-687 ◽

Cited By ~ 3

Author(s):

Ramona Orăştean

Keyword(s):

Currency Internationalization

Download Full-text

Short-Term Capital Flows, Exchange Rate Expectation and Currency Internationalization: Evidence from China

Journal of Risk and Financial Management ◽

10.3390/jrfm14050223 ◽

2021 ◽

Vol 14 (5) ◽

pp. 223

Author(s):

Mingming Li ◽

Fengming Qin ◽

Zhaoyong Zhang

Keyword(s):

Exchange Rate ◽

Capital Flows ◽

Capital Inflow ◽

Interactive Effects ◽

Var Model ◽

Short Term ◽

Rmb Appreciation ◽

Currency Internationalization ◽

Rmb Internationalization ◽

Rate Expectation

This paper intended to employ a portfolio approach to assess the effect of exchange rate expectation on Chinese RMB internationalization and empirically test the interactive effects among short-term capital flows, RMB appreciation expectation and the internationalization process using a VAR model with monthly data ranging from February 2004 to December 2020. The results suggest that RMB exchange rate appreciation could lead to an increase in the foreign demand for RMB and RMB denominated assets, while RMB internationalization would attract more short-term capital inflow due to the reduced transaction costs. The empirical evidence from the VAR model estimation confirms the finding that expected RMB appreciation induces short-term capital inflow and promotes RMB internationalization. The robustness checks confirm the evidence. The results have important policy implication for RMB internationalization and for maintaining a sound and stable financial system.

Download Full-text