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Prospects for Creating a Reserve Currency by the Shanghai Cooperation Organization Countries

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  • Igor Sergeevich Ivanchenko

    (Rostov State University of Economics)

Abstract

The purpose of this study is to clarify the prospects for the creation of a new reserve currency by the (Shanghai Cooperation Organization (SCO) countries to reduce foreign exchange costs in trade transactions, to strengthen integration processes in the Eurasian space, to increase the investment potential of developing Asian countries and to stimulate sustainable economic growth. The paper presents the results of mathematical modeling of the optimal portfolio structure of collateral assets with the possible issuance of a new reserve currency by the SCO countries. The article concludes that currently the best reserve assets that have been analyzed are the Chinese yuan, Indian rupee and gold. The expected return of the new reserve currency does not depend on fluctuations in the global foreign exchange market, and its calculated risk (standard deviation of return) turned out to be lower than the risk of fluctuations in the value of the yuan and gold. The article concludes that gold is the best collateral asset, as it has a stable positive yield, constant purchasing power and a fair value that is 4 times higher than the market value. It is proposed to issue a new reserve currency in the form of stablecoins so that it incorporates all the best properties of cryptocurrencies and fiat money

Suggested Citation

  • Igor Sergeevich Ivanchenko, 2024. "Prospects for Creating a Reserve Currency by the Shanghai Cooperation Organization Countries," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 128-153.
    • Handle: RePEc:far:spaeco:y:2024:i:3:p:128-153
    DOI: https://dx.doi.org/10.14530/se.2024.3.128-153
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    More about this item

    Keywords

    Economic development; gold standard; Markowitz model; non-inflationary issue; fair value; Shanghai Cooperative Organization (SCO);
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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