Ryan, John (2009): China and the Reserve Currency Question.
Download (98kB) | Preview
China’s concern about its U.S. Dollar reserves is being amplified by the low returns of some of China’ investments in the U.S. which leads to a broader concern about how the current reserve system basically entails China lending to the U.S. at very low interest rates. A two-currency reserve system would potentially be even more unstable than the existing one, because of speculation moves in and out of the U.S. Dollar and the Euro depending on their return, increasing volatility. U.S. Policymakers have started to realize that large external deficits, the dominance of the dollar, and the large capital inflows that necessarily accompany deficits and currency dominance are no longer in the U.S. national interest. The U.S. has to consider initiatives put forward over the past year by China and others to begin a serious discussion of reforming the international monetary system. This chapter will examine four scenarios regarding the global currency regime of the future and the Chinese influence in this most important policy arena. It will focus on the U.S. Dollar decline as the Reserve Currency, on the Euro gaining strength slowly in a turbulent world, on the potential of the Renminbi to become a Reserve Currency, and on the future of the Super-Sovereign Reserve Currency, the IMF’s Special Drawing Rights (SDRs).
Before that it will examine the role of the Renminbi in the Asian Financial Crisis in 1997 and its role in the global financial markets at that time and lessons learnt from the crisis. The crisis had significant macro-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries.
|Item Type:||MPRA Paper|
|Original Title:||China and the Reserve Currency Question|
|Keywords:||CHINA; U.S.; EUROZONE; DOLLAR; EURO; SPECIAL DRAWING RIGHTS; RENMINBI|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
F - International Economics > F0 - General > F02 - International Economic Order and Integration
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
A - General Economics and Teaching > A1 - General Economics > A10 - General
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
|Depositing User:||John Ryan|
|Date Deposited:||29 Oct 2009 00:07|
|Last Modified:||28 Feb 2016 12:27|
Aiyar, S. S. 2009. An International Monetary Fund Currency to Rival the Dollar? Why Special Drawing Rights Can't Play That Role. 7 July 7 2009, Development Policy Analysis no.10,Washington: Cato Institute.
Bergsten, C. F. 2009. We Should Listen to Beijing’s Currency Idea. Financial Times, 8 April.
Bloomberg. 2009. Geithner Remarks on IMF Currency Roll. Foreign Exchange Market, 26 March.
Blustein, P. 2001. The Chastening: Inside The Crisis That Rocked The Global Financial System And Humbled The IMF. New York: Public Affairs Books.
Branstetter, L. and Lardy, N. 2006. China's Embrace of Globalization. NBER Working Paper No. W12373.
Chinn, M. and Frankel, J. 2008. Why the Euro Will Rival the Dollar. International Finance, 11(1), 49-73.
Chinn, M. and Frankel, J. 2007. Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency? in: G7 Current Account Imbalances:Sustainability and Adjustment, NBER Report, edited by R. Clarida. University of Chicago Press, 283-321.
Cooper, R. 2009. The Future of the Dollar. Policy Briefs in International Economics, Washington: Peterson Institute for International Economics.
De Larosière Group report. 2009. European Commission, Brussels. 25 February. DG ECFIN (Directorate General Economics and Finance) 2008. EMU@10—Successes and Challenges after Ten Years of Economic and Monetary Union. Available at http://ec.europa.eu. (accessed: 2 June 2008).
Duncan, R. 2005. The Dollar Crisis: Causes, Consequences, Cures. Chichester: John Wiley & Sons.
ECB 2009. Annual review of the International Role of the Euro. Available at:www.ecb.europa.eu
Eichengreen, B. 2009. The Dollar Dilemma: The World’s Top Currency Faces Competition. Foreign Affairs, September/October.
Eichengreen, B. and Frankel J. 1996.The SDR, Reserve Currencies, and the Future of the International Monetary System. in The Future of the SDR in Light of Changes in the International Financial System, edited by M. Mussa, J. Boughton, and P. Isard. Washington D.C.: International Monetary Fund, Washington D.C.,
Fratianni, M. and Artis, M.J. 1996. The lira and the pound in the 1992 currency crisis: Fundamentals or speculation? Open Economics Review, 7(Supplement 1), 573-589.
Galati, G. and Wooldridge, P. 2006. The Euro as a reserve currency: a challenge to the pre-eminence of the US dollar? BIS Working Paper, No 218, October
Gang, F. 2006. Currency Asymmetry, Global Imbalances, and Rethinking of the International Currency System Global Imbalances and the US Debt Problem - Should Developing Countries Support the US Dollar? Fondad, The Hague, December.
García-Herrero, A. and Koivu, T. 2009. China’s exchange rate policy and Asian trade. Bank of International Settlements, working paper number 282.
Garten, J. 2009. Amid the rubble Shangkong will rise. Financial Times, 11 May.
Goldstein, M. 2005. Renminbi Controversies. Paper prepared for the Conference on Monetary Institutions and Economic Development, Cato Institute, Washington, D.C. 3 November. Revised December 2005.
Goldstein, M. and Lardy, N. 2008. Debating China’s Exchange Rate Policy. Policy Analyses in International Economics. Peterson Institute for International Economics, Washington D.C., April.
Goldstein, M and Lardy, N. 2009. The Future of China’s Exchange Rate Policy. Policy Analyses in International Economics. Peterson Institute for International Economics. Washington D.C. Month??
Halligan, L. 2009. There will be slim pickings if China loses its appetite for Western debt. Sunday Telegraph, 22 February.
Kaufman, G.G., Krueger, TH. and Hunter, WC. 1999. The Asian Financial Crisis: Origins, Implications and Solutions. New York: Springer.
Krugman, P. 2009. China’s Dollar Trap. New York Times, April 2.
Liew, L.H. 2003. The Role of China's Bureaucracy in its No-Devaluation Policy during the Asian Financial Crisis. Japanese Journal of Political Science, 4(1), 61-76.
Menzie, C. and Frankel, J.A. 2007. Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency? in G7 Current Account Imbalances: Sustainability and Adjustment, edited by R. Clarida. Chicago: University of Chicago Press, pages??
Milne, A. 2009. The Fall of the House of Credit: What Went Wrong in Banking and What can be Done to Repair the Damage? Cambridge: Cambridge University Press.
Pisani-Ferry, J. and Posen, A. 2009. The Euro at Ten: The Next Global Currency? Peterson Institute for International Economics, Washington D.C.
Portes, R. 2007. The rise of the Euro. Available at: http://www.voxeu.org (accessed: 14 June 2007).
Posen, A. 2008. Why the Euro Will Not Rival the Dollar. International Finance, 11(1), 75–100.
Reuters. 2009. Euro's Share in Reserves Overtakes U.S. Dollar, 19 May.
Ries, P. 2000. The Asian Storm: Asia's Economic Crisis Examined. Place of publication??: Tuttle Publishing.
Schuman M. 2009. Is the Almighty Dollar Doomed. Time, 6 April.
Teh, R.R. 1999. The Effects of a RENMINBI Devaluation on ASEAN Economies: An Applied General Equilibrium Approach. A paper presented at the China-ASEAN Research Institutes Roundtable University of Hong Kong, 16-18 September.
Thimann, C. 2009. Global Roles of Currencies. ECB Working Paper Series, No 1031.
Waldmeir, P. 2009. Beijing bets on bullion to diversify foreign reserves. Financial Times, 7 May.
Weisbrot, M. August 2007. Ten Years After: The Lasting Impact of the Asian Financial Crisis, Center for Economic and Policy Research, London
Wijnholds, O. 2009. The Dollar's Last Days? /www.project-syndicate.org, (accessed: 30 May 2009).
Wu, H.X. 1998. Reform of China's Foreign Exchange Regime and its Implications in the Light of the Asian Financial Crisis. MOCT-MOST: Economic Policy in Transitional Economies, Volume 8, Number3 pp. 81-105(25).
Zhang Z. 1996. The Exchange Value of the Renminbi and China's Balance of Trade: An Empirical Study. NBER Working Paper No. W5771.
Zhou X. 2009. Reform the International Monetary System. People’s Bank of China. Available at: http://www.pbc.gov.cn/english. (accessed: 3 March 2009).