The Impact of Yuan Internationalization on the Euro-Dollar Exchange Rate
AbstractWe study the implication of a multipolarization of the international monetary system on cross-currency volatility. More specifically, we analyze whether the internationalization of the yuan could modify the impact of asset supply and trade shocks on the euro-dollar exchange rate, within a three-country, three-currency portfolio model. Our static model shows that the internationalization of the yuan (defined as a rise in the yuan in international portfolios) would be either neutral or stabilizing for the euro-dollar rate, whatever the exchange-rate regime of China. Moving to a dynamic, stock-flow framework, we show that the internationalization of the yuan would make exchange-rate variations more efficient to stabilize net foreign asset positions after a trade shock.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2013-14.
Date of creation: May 2013
Date of revision:
China; yuan; exchange-rate regime; euro; dollar;
Other versions of this item:
- Agnès Bénassy-Quéré & Yeganeh Forouheshfar, 2013. "The impact of yuan internationalization on the euro-dollar exchange rate," Documents de travail du Centre d'Economie de la Sorbonne 13016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Agnès Bénassy-Quéré & Yeganeh Forouheshfar, 2013. "The impact of yuan internationalization on the euro-dollar exchange rate," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00801100, HAL.
- Agnes Benassy-Quere & Yeganeh Forouheshfar, 2013. "The Impact of Yuan Internationalization on the Euro-Dollar Exchange Rate," CESifo Working Paper Series 4149, CESifo Group Munich.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-EEC-2013-07-05 (European Economics)
- NEP-IFN-2013-07-05 (International Finance)
- NEP-MON-2013-07-05 (Monetary Economics)
- NEP-OPM-2013-07-05 (Open Economy Macroeconomics)
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