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RMB internationalisation and currency co-operation in East Asia

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  • Volz, Ulrich

Abstract

This paper scrutinises the state of RMB internationalisation and its likely progress over the coming years and discusses its implications for currency co-operation in East Asia. As part of its internationalisation, the RMB is gradually delinked from the dollar, which will effectively put an end to the East Asian dollar standard that has shaped the region's financial architecture over the last three decades and that has provided a relatively high degree of intra-regional exchange rate stability. Because of the close trade and investment ties that have developed across the region, the East Asian countries, especially the ASEAN countries which are striving to create an ASEAN Economic Community, will continue to manage their exchange rates and stabilise their currencies against one another to facilitate cross-border investment and commerce. But instead of a replacing of the dollar standard with an RMB standard we are likely to see some rather loose and informal exchange rate co-operation in East Asia based on currency baskets, with China herself moving towards a managed exchange rate system guided by a currency basket. --

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Bibliographic Info

Paper provided by University of Leipzig, Faculty of Economics and Management Science in its series Working Papers with number 125.

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Date of creation: 2013
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Handle: RePEc:zbw:leiwps:125

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Keywords: RMB internationalisation; key currencies; Chinese economy; East Asian monetary co-operation; currency baskets;

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  1. Pontines, Victor & Siregar, Reza Y., 2010. "Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi," MPRA Paper 25408, University Library of Munich, Germany.
  2. Benjamin Cohen, 2012. "The Benefits and Costs of an International Currency: Getting the Calculus Right," Open Economies Review, Springer, vol. 23(1), pages 13-31, February.
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  10. Dowd, Kevin & Greenaway, David, 1993. "Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas," Economic Journal, Royal Economic Society, vol. 103(420), pages 1180-89, September.
  11. Ronald McKinnon & Gunther Schnabl, 2003. "The East Asian Dollar Standard, Fear of Floating, and Original Sin," Working Papers 03001, Stanford University, Department of Economics.
  12. Garcia-Herrero , Alicia & Xia, Le, 2013. "China’s RMB bilateral swap agreements: What explains the choice of countries?," BOFIT Discussion Papers 12/2013, Bank of Finland, Institute for Economies in Transition.
  13. C. Randall Henning, 2012. "Choice and Coercion in East Asian Exchange Rate Regimes," Working Paper Series WP12-15, Peterson Institute for International Economics.
  14. Ulrich Volz, 2010. "Prospects for Monetary Cooperation and Integration in East Asia," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013991, December.
  15. Volz, Ulrich, 2006. "On the feasibility of a regional exchange rate system for East Asia: Lessons of the 1992/1993 EMS crisis," Journal of Asian Economics, Elsevier, vol. 17(6), pages 1107-1127, December.
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