IDEAS home Printed from https://ideas.repec.org/a/kap/iaecre/v24y2018i4d10.1007_s11294-018-9711-y.html
   My bibliography  Save this article

Currency Internationalization and the International Price System

Author

Listed:
  • Hailong Jin

    (South Dakota State University)

  • Wisdom Takumah

    (Emory University)

  • Josiah Jorenby

    (South Dakota State University)

Abstract

Although China, now the world’s second largest economy and largest goods trading nation, has rolled out the ambitious currency internationalization protocol while maintaining strict capital controls for nearly a decade, the implications of this unique reform path on the international economy still present uncertainties. In this paper, we fill in this gap by developing a two country, two-goods model to investigate the impacts of currency internationalization on the international price system, which consists of goods market and factor market interactions. We propose a critical condition of sustainable currency internationalization and reveal high international price sensitivity to exchange rate adjustments.

Suggested Citation

  • Hailong Jin & Wisdom Takumah & Josiah Jorenby, 2018. "Currency Internationalization and the International Price System," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(4), pages 303-309, November.
    • Handle: RePEc:kap:iaecre:v:24:y:2018:i:4:d:10.1007_s11294-018-9711-y
    DOI: 10.1007/s11294-018-9711-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11294-018-9711-y
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11294-018-9711-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
    2. Charles Engel & Akito Matsumoto, 2009. "The International Diversification Puzzle When Goods Prices Are Sticky: It's Really about Exchange-Rate Hedging, Not Equity Portfolios," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 155-188, July.
    3. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
    4. Barry Eichengreen & Masahiro Kawai, 2014. "Issues for Renminbi Internationalization : An Overview," Finance Working Papers 23961, East Asian Bureau of Economic Research.
    5. Dorrucci, Ettore & McKay, Julie, 2011. "The international monetary system after the financial crisis," Occasional Paper Series 123, European Central Bank.
    6. repec:zbw:bofitp:2014_017 is not listed on IDEAS
    7. Dorrucci, Ettore & McKay, Julie, 2011. "The international monetary system after the financial crisis," Occasional Paper Series 123, European Central Bank.
    8. Batten, Jonathan A. & Szilagyi, Peter G., 2016. "The internationalisation of the RMB: New starts, jumps and tipping points," Emerging Markets Review, Elsevier, vol. 28(C), pages 221-238.
    9. Robert C. Feenstra & Philip Luck & Maurice Obstfeld & Katheryn N. Russ, 2018. "In Search of the Armington Elasticity," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 135-150, March.
    10. Cheung, Yin-Wong & Rime, Dagfinn, 2014. "The offshore renminbi exchange rate: Microstructure and links to the onshore market," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 170-189.
    11. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Dynamics of the trade balance and the terms of trade: the J-curve revisited," Discussion Paper / Institute for Empirical Macroeconomics 65, Federal Reserve Bank of Minneapolis.
    12. Eichengreen, Barry, 2012. "Exorbitant Privilege: The Rise and Fall of the Dollar," OUP Catalogue, Oxford University Press, number 9780199642472, Decembrie.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jonathan Heathcote & Fabrizio Perri, 2013. "The International Diversification Puzzle Is Not as Bad as You Think," Journal of Political Economy, University of Chicago Press, vol. 121(6), pages 1108-1159.
    2. Heathcote, Jonathan & Perri, Fabrizio, 2014. "Assessing International Efficiency," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 523-584, Elsevier.
    3. Nicolas Coeurdacier & Hélène Rey, 2013. "Home Bias in Open Economy Financial Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 51(1), pages 63-115, March.
    4. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g81p7j6b6 is not listed on IDEAS
    5. Christoph E. Boehm & Aaron Flaaen & Nitya Pandalai-Nayar, 2019. "Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 60-75, March.
    6. Michael B. Devereux & Ozge Senay & Alan Sutherland, 2014. "Nominal Stability and Financial Globalization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(5), pages 921-959, August.
    7. Bouakez, Hafedh & Eyquem, Aurélien, 2015. "Government spending, monetary policy, and the real exchange rate," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 178-201.
    8. Michael B. Devereux & Ozge Senay & Alan Sutherland, 2014. "Nominal Stability and Financial Globalization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(5), pages 921-959, August.
    9. Bems, Rudolfs, 2014. "Intermediate inputs, external rebalancing and relative price adjustment," Journal of International Economics, Elsevier, vol. 94(2), pages 248-262.
    10. Saroj Bhattarai & Konstantin Kucheryavyy, 2018. "A Unified Model of International Business Cycles and Trade," 2018 Meeting Papers 1259, Society for Economic Dynamics.
    11. Hakan Yilmazkuday, 2017. "Unifying Macro Elasticities in International Economics," Globalization Institute Working Papers 299, Federal Reserve Bank of Dallas.
    12. Ke Pang, 2011. "Equity home bias, incomplete financial markets, and nominal rigidities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 340-363, February.
    13. Gao, Xiaodan & Hnatkovska, Viktoria & Marmer, Vadim, 2014. "Limited participation in international business cycle models: A formal evaluation," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 255-272.
    14. Nicolas Coeurdacier & Hélène Rey, 2010. "Home bias in open economy financial macroeconomics," SciencePo Working papers Main hal-01069440, HAL.
    15. Cavallari, Lilia, 2022. "The international real business cycle when demand matters," Journal of Macroeconomics, Elsevier, vol. 73(C).
    16. Nicolas Coeurdacier & Hélène Rey, 2010. "Home bias in open economy financial macroeconomics," SciencePo Working papers hal-01069440, HAL.
    17. repec:hal:spmain:info:hdl:2441/1shj1p7td8e0r5c9fcsnk8a91 is not listed on IDEAS
    18. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2020. "Estimating the Armington elasticity: The importance of study design and publication bias," Journal of International Economics, Elsevier, vol. 127(C).
    19. Yilmazkuday, Hakan, 2019. "Understanding the international elasticity puzzle," Journal of Macroeconomics, Elsevier, vol. 59(C), pages 140-153.
    20. Ayse Kabukcuoglu & Enrique Martínez-García, 2016. "What Helps Forecast U.S. Inflation?—Mind the Gap!," Koç University-TUSIAD Economic Research Forum Working Papers 1615, Koc University-TUSIAD Economic Research Forum.
    21. Robert Kollmann, 2012. "Limited asset market participation and the consumption‐real exchange rate anomaly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(2), pages 566-584, May.
    22. Rabanal, Pau & Rubio-Ramírez, Juan F., 2015. "Can international macroeconomic models explain low-frequency movements of real exchange rates?," Journal of International Economics, Elsevier, vol. 96(1), pages 199-211.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iaecre:v:24:y:2018:i:4:d:10.1007_s11294-018-9711-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.