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RMB internationalisation and currency co-operation in East Asia

  • Volz, Ulrich

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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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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Web page: http://www.wifa.uni-leipzig.de/en/dekanat.html

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  1. 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.
  2. 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.
  3. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series WP11-14, Peterson Institute for International Economics.
  4. Willem THORBECKE, 2006. "The Effect of Exchange Rate Changes on Trade in East Asia," Discussion papers 06009, Research Institute of Economy, Trade and Industry (RIETI).
  5. Ronald McKinnon & Gunther Schnabl, 2003. "The East Asian Dollar Standard, Fear of Floating, and Original Sin," Working Papers 03001, Stanford University, Department of Economics.
  6. Prasad, Eswar S. & Ye, Lei, 2011. "The renminbi’s role in the global monetary system," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 127-197.
  7. C. Randall Henning, 2012. "Choice and Coercion in East Asian Exchange Rate Regimes," Working Paper Series WP12-15, Peterson Institute for International Economics.
  8. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  9. Victor Pontines & Reza Y. Siregar, 2010. "Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp78.
  10. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2009. "Bretton Woods II Still Defines the International Monetary System," NBER Working Papers 14731, National Bureau of Economic Research, Inc.
  11. 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.
  12. Arvind Subramanian & Martin Kessler, 2012. "The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?," Working Paper Series WP12-19, Peterson Institute for International Economics, revised 2013.
  13. Nicholas R. Lardy, 2012. "Sustaining China's Economic Growth after the Global Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6260.
  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, June.
  15. 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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