IDEAS home Printed from https://ideas.repec.org/p/cth/wpaper/gru_2019_011.html
   My bibliography  Save this paper

Geographic spread of currency trading: The renminbi and other EM currencies

Author

Listed:
  • Yin-Wong Cheung

    (City University of Hong Kong)

  • Robert N McCauley

    (Bank for International Settlements)

  • Chang Shu

    (Bloomberg)

Abstract

We study the ongoing diffusion of renminbi trading across the globe, the first such research for an international currency. We analyse the distribution in offshore renminbi trading in 2013 and 2016, using comprehensive data from the central bank triennial survey of foreign exchange markets. In 2013, Asian centres favoured by the policy of renminbi internationalisation had big shares in global renminbi trading. In the following three years, renminbi trading seemed to converge to the spatial pattern of all currencies, with a half-life of 7-8 years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall the renminbi’s internationalisation is tracing an arc from the influence of administrative measures to the working of market forces.

Suggested Citation

  • Yin-Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic spread of currency trading: The renminbi and other EM currencies," GRU Working Paper Series GRU_2019_011, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2019_011
    as

    Download full text from publisher

    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232019-011%20Cheung.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barry Eichengreen & Romain Lafarguette & Arnaud Mehl, 2016. "Cables, Sharks and Servers: Technology and the Geography of the Foreign Exchange Market," NBER Working Papers 21884, National Bureau of Economic Research, Inc.
    2. Cassis,Youssef, 2006. "Capitals of Capital," Cambridge Books, Cambridge University Press, number 9780521845359, September.
    3. Robert McCauley & Michela Scatigna, 2011. "Foreign exchange trading in emerging currencies: more financial, more offshore," BIS Quarterly Review, Bank for International Settlements, March.
    4. Hutton, Alexander & Kent, Edward, 2016. "The foreign exchange and over-the-counter interest rate derivatives market in the United Kingdom," Bank of England Quarterly Bulletin, Bank of England, vol. 56(4), pages 224-237.
    5. Robert Neil McCauley & Chang Shu, 2016. "Non-deliverable forwards: impact of currency internationalisation and derivatives reform," BIS Quarterly Review, Bank for International Settlements, December.
    6. Torsten Ehlers & Frank Packer, 2013. "FX and derivatives markets in emerging economies and the internationalisation of their currencies," BIS Quarterly Review, Bank for International Settlements, December.
    7. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters, in: Exchange Rate Theory and Practice, pages 261-278, National Bureau of Economic Research, Inc.
    8. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1.
    9. Cheung, Yin-Wong & Yiu, Matthew S., 2017. "Offshore renminbi trading: Findings from the 2013 Triennial Central Bank Survey," International Economics, Elsevier, vol. 152(C), pages 9-20.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheung, Yin-Wong & Grimm, Louisa & Westermann, Frank, 2021. "The evolution of offshore renminbi trading: 2016 to 2019," Journal of International Money and Finance, Elsevier, vol. 113(C).
    2. Cerutti, Eugenio & Casanova, Catherine & Pradhan, Swapan-Kumar, 2023. "Banking across borders: Are Chinese banks different?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    3. Frank Westermann, 2023. "On the Geographical Dispersion of Euro Currency Trading: An Analysis of the First 20 Years and a Comparison to the RMB," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 263-287, June.
    4. Haihong Gao & Yingting Li, 2020. "The Renminbi as a Trading Currency: Evidence from Selected Countries Participating in the Belt and Road Initiative," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 45-63, September.
    5. Kerry Liu, 2020. "Hong Kong: Inevitably irrelevant to China?," Economic Affairs, Wiley Blackwell, vol. 40(1), pages 2-23, February.
    6. Robert N McCauley & Catherine R Schenk, 2020. "Central bank swaps then and now: swaps and dollar liquidity in the 1960s," BIS Working Papers 851, Bank for International Settlements.
    7. Yin-Wong Cheung, 2023. "A decade of RMB internationalisation," Economic and Political Studies, Taylor & Francis Journals, vol. 11(1), pages 47-74, January.
    8. Arslanalp, Serkan & Eichengreen, Barry & Simpson-Bell, Chima, 2022. "The stealth erosion of dollar dominance and the rise of nontraditional reserve currencies," Journal of International Economics, Elsevier, vol. 138(C).
    9. Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.

    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. He, Dong & Yu, Xiangrong, 2016. "Network effects in currency internationalisation: Insights from BIS triennial surveys and implications for the renminbi," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 203-229.
    2. Cheung, Yin-Wong & Grimm, Louisa & Westermann, Frank, 2021. "The evolution of offshore renminbi trading: 2016 to 2019," Journal of International Money and Finance, Elsevier, vol. 113(C).
    3. Frank Westermann, 2023. "On the Geographical Dispersion of Euro Currency Trading: An Analysis of the First 20 Years and a Comparison to the RMB," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 263-287, June.
    4. Delphine Lahet & Stéphanie Prat, 2021. "Internationalisation of emerging market currencies and original sin: Empirical evidence," The World Economy, Wiley Blackwell, vol. 44(7), pages 1973-2003, July.
    5. Barry Eichengreen & Arnaud Mehl & Livia Chiţu & Thorsten Beck, 2019. "Mars or Mercury? The geopolitics of international currency choice," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 315-363.
    6. Barry Eichengreen & Chitu Livia & Arnaud Mehl, 2014. "Stability or upheaval? The currency composition of international reserves in the long run," Globalization Institute Working Papers 201, Federal Reserve Bank of Dallas.
    7. Carsten Detken & Philipp Hartmann, 2000. "The Euro and International Capital Markets," International Finance, Wiley Blackwell, vol. 3(1), pages 53-94, April.
    8. Eichengreen, Barry & Flandreau, Marc & Mehl, Arnaud & Chitu, Livia, 2017. "International Currencies Past, Present, and Future: Two Views from Economic History," OUP Catalogue, Oxford University Press, number 9780190659455.
    9. Yin-Wong Cheung, 2023. "A decade of RMB internationalisation," Economic and Political Studies, Taylor & Francis Journals, vol. 11(1), pages 47-74, January.
    10. Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.
    11. Menzie Chinn, 2015. "Emerging Market Economies and the Next Reserve Currencies," Open Economies Review, Springer, vol. 26(1), pages 155-174, February.
    12. Richard Fabling & Lynda Sanderson, 2015. "Export Performance, Invoice Currency and Heterogeneous Exchange Rate Pass-through," The World Economy, Wiley Blackwell, vol. 38(2), pages 315-339, February.
    13. Xiaoli Chen & Yin‐Wong Cheung, 2011. "Renminbi Going Global," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(2), pages 1-18, March.
    14. Kannan, Prakash, 2009. "On the welfare benefits of an international currency," European Economic Review, Elsevier, vol. 53(5), pages 588-606, July.
    15. Ogawa, Eiji & Sasaki, Yuri Nagataki, 1998. "Inertia in the key currency," Japan and the World Economy, Elsevier, vol. 10(4), pages 421-439, October.
    16. Hyoung-kyu Chey, 2013. "The Concepts, Consequences, and Determinants of Currency Internationalization," GRIPS Discussion Papers 13-03, National Graduate Institute for Policy Studies.
    17. Gabriele Galati & Philip Wooldridge, 2009. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-23.
    18. OGAWA Eiji & MUTO Makoto, 2018. "What Determines Utility of International Currencies?," Discussion papers 18077, Research Institute of Economy, Trade and Industry (RIETI).
    19. Ayoub Yousefi, 2000. "Merchandise Trade Balances of Less Developed Countries and Exchange Rate of the U.S. Dollar: Cases of Iran, Venezuela & Saudi Arabia," Working Papers 00002, University of Waterloo, Department of Economics, revised Feb 2000.
    20. Meng, Jingjing, 2016. "Asian emerging-market currencies in the international debt market (1994–2014)," Journal of Asian Economics, Elsevier, vol. 42(C), pages 20-32.

    More about this item

    Keywords

    international currency; FX turnover; renminbi internationalisation; international financial centre;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:cth:wpaper:gru_2019_011. 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: GRU (email available below). General contact details of provider: https://edirc.repec.org/data/decithk.html .

    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.