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Global Implications of the Renminbi’s Ascendance

  • Prasad, Eswar

    (Asian Development Bank Institute)

This paper evaluates the prospects for the renminbi’s role as an international currency and the implications for global financial markets. Although the People’s Republic of China (PRC) does not have either an open capital account or a flexible exchange rate, the renminbi has attained considerable traction as an international currency on account of the PRC’s rising shares of global trade and gross domestic product. Through bilateral swaps that the People's Bank of China has established with other central banks, the renminbi is also becoming more prominent in international finance. However, the renminbi is unlikely to become a major reserve currency in the absence of capital account convertibility, a flexible exchange rate, and better-developed financial markets. The renminbi’s rising prominence—if it is accompanied by significant economic reforms within the PRC—could add to the stability of Asian and global financial systems.

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File URL: http://www.adbi.org/files/2014.03.25.wp469.global.implications.renminbi.ascendance.pdf
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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 469.

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Length: 26 pages
Date of creation: 28 Mar 2014
Date of revision:
Handle: RePEc:ris:adbiwp:0469
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  1. Chamon, Marcos & Liu, Kai & Prasad, Eswar, 2013. "Income uncertainty and household savings in China," Journal of Development Economics, Elsevier, vol. 105(C), pages 164-177.
  2. Frankel, Jeffrey, 2004. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adustment under a Flexible Rate," Working Paper Series rwp04-037, Harvard University, John F. Kennedy School of Government.
  3. Wendy Dobson & Paul R. Masson, 2007. "Will the Renminbi Become a World Currency?," Working Papers Series 10, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Dec 2007.
  4. Marvin Goodfriend & Eswar Prasad, 2006. "A Framework for Independent Monetary Policy in China," IMF Working Papers 06/111, International Monetary Fund.
  5. Arvind Subramanian, 2011. "Eclipse: Living in the Shadow of China's Economic Dominance," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6062, December.
  6. Ignazio Angeloni & Agnès Bénassy-Quéré & Benjamin Carton & Christophe Destais & Zsolt Darvas & Jean Pisani-Ferry & André Sapir & Shahin Vallée, . "Global currencies for tomorrow: a European perspective," Blueprints, Bruegel, number 592, 5.
  7. M. Ayhan Kose & Eswar Prasad & Kenneth S. Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," NBER Working Papers 12484, National Bureau of Economic Research, Inc.
  8. Barry, Eichengreen, 2011. "The renminbi as an international currency," Journal of Policy Modeling, Elsevier, vol. 33(5), pages 723-730, September.
  9. Daniel H. Rosen & Thilo Hanemann, 2009. "China's Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications," Policy Briefs PB09-14, Peterson Institute for International Economics.
  10. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
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