Offshore markets for the domestic currency: monetary and financial stability issues
AbstractWe show in this paper that offshore markets intermediate a large chunk of financial transactions in major reserve currencies such as the US dollar. We argue that, for emerging market economies that are interested in seeing some international use of their currencies, offshore markets can help to increase the recognition and acceptance of the currency while still allowing the authorities to retain a measure of control over the pace of capital account liberalisation. The development of offshore markets could pose risks to monetary and financial stability in the home economy which need to be prudently managed. The experience of the Federal Reserve and of the authorities of the other major reserve currency economies in dealing with the euromarkets shows that policy options are available for managing such risks.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 320.
Length: 32 pages
Date of creation: Sep 2010
Date of revision:
offshore markets; currency internationalisation; monetary stability; financial stability;
Other versions of this item:
- Dong He & Robert N. McCauley, 2010. "Offshore Markets for the Domestic Currency: Monetary and Financial Stability Issues," Working Papers 1002, Hong Kong Monetary Authority.
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-CBA-2010-10-02 (Central Banking)
- NEP-IFN-2010-10-02 (International Finance)
- NEP-MAC-2010-10-02 (Macroeconomics)
- NEP-MON-2010-10-02 (Monetary Economics)
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