Currency composition of reserves, trade invoicing and currency movements

Ito, Hiroyuki; McCauley, Robert N.; Chan, Tracy

doi:10.1016/j.ememar.2015.11.001

Cited by 26 publications

(17 citation statements)

References 12 publications

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“…McCauley and Chan 2014, and Ito, McCauley, Chan (2015) provide evidence consistent with the use of domestic currency as numeraire. They estimate the currency movement for 25 economies, and find cross-sectional evidence that the share of the dollar in reserves is higher where the domestic currency varies less against the dollar than other major currencies.…”

Section: Domestic Currency As Numerairementioning

confidence: 88%

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Determinants of Currency Composition of Reserves: a Portfolio Theory Approach with an Application to RMB

Wang²

2019

IMF Working Papers

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The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches-liquidity tranche and investment tranche-especially for those with adequate reserves. Incorporating reserve tranching, we have developed in this paper a central bank's reserve portfolio choice model to analyze the determinants of the currency composition of reserves. In particular, we adopt the classical mean-variance framework for the investment tranche and the asset-liability framework for the liquidity tranche. Building on these frameworks, the roles of currency compositions in imports invoicing and short-term external debt, and risk and returns of reserve currencies can be quantified by our structural model-a key contribution of our paper given the absence of structural models in the literature. Finally, we estimate the potential paths of the share of RMB in reserves under different scenarios to shed light on its status as an international currency.

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Section: Domestic Currency As Numerairementioning

confidence: 88%

“…28 McCauley and Chan (2014), andIto et al (2015) point out that, for China's trading partners, both changing trade invoicing and currency movements could make RMB more attractive for reserve managers.29 …”

mentioning

confidence: 99%

Determinants of Currency Composition of Reserves: a Portfolio Theory Approach with an Application to RMB

Wang²

2019

IMF Working Papers

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“…However, these strict controls did not have any link with the currency appreciation detected in some countries in their sample. Ito, McCauley, and Chan (2015) studied a small open economy and focused on simple policy rules, while Devereux et al (2019) investigated the optimal monetary policy and optimal CC. A model with fixed exchange rates, downward nominal wage rigidities, and free capital mobility was presented by Bayoumi et al (2015), where an optimal devaluation eliminates the effects of the wage rigidity.…”

Section: Literature Review Multiple Effects On Monetary and Exchange mentioning

confidence: 99%

The Multiple Effects of Capital Controls

Zehri

2020

CER

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Capital controls are seen as a means to promote financial stability or improve macroeconomic adjustment in economies with nominal rigidities and suboptimal monetary policy. Such controls may take various forms, including explicit or implicit taxation of cross‑border financial flows and dual or multiple exchange rate systems. Using a quarter dataset on capital controls actions in 27 emerging economies from 2010 to 2018, the study analyzes the effectiveness of capital controls (CCs) along different angles. Since the 2008 financial crisis, strengthening capital controls has allowed more monetary policy autonomy and exchange rate stability, verifying the Mundell‑Fleming trilemma model. Following CCs, the results show that accumulating international reserves may compensate for the loss of inflows and lead to more effective policies. Tighter CCs on inflows cause significant spillovers, specifically in the conditions of liquidity abundance. These spillovers originate from the problem of policy coordination of emerging economies and are mainly caused by capital controls being used as an instrument to manage capital flows. For governments that have to manage the risks associated with inflow surges or disruptive outflows, capital controls need to play a key role.

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“…Parmi les autres pays, on trouve 11 pays asiatiques, la Malaisie étant le premier à avoir fait ce choix (Frankel [2011]). Le RMB est donc la 7 ième monnaie de composition des réserves de change mondiales, même si cela reste encore marginal : la part des réserves de change libellées en RMB est de 1.1 % du total des réserves de change mondiales en 2014-2015, mais la progression a été forte (Coudert et Lez [2015] ; Garcia-Herrero [2015] ; Ito et al [2015]).…”

Section: Les Réalisations En Appui Du Succès De L'internationalisation Large Du Rmbunclassified

“…Si les pays émergents détiennent en 2013 67 % des réserves de change mondiales contre 37 % en 2000, leurs monnaies ne composent que 3.14 % des réserves de change mondiales (1.76 % en 2000), contre 61.44 % pour le dollar, 24.16 % pour l'euro, 3.86 % pour le yen et 3.92 % pour la livre sterling. En 2014-2015, le RMB compose 1.1 % de ces réserves (Coudert et Lez [2015] ; Garcia-Herrero [2015] ; Ito et al [2015]). Certains auteurs (Lee [2014] ; Huang, Wang et Fan [2014]) estiment que la part du RMB pourra être de l'ordre de 10 % à l'avenir.…”

Section: La Fonction Réserve De Valeurunclassified

Le degré d’internationalisation du Renminbi

Lahet¹

2017

Revue d'Économie Politique

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Distribution électronique Cairn.info pour Dalloz. © Dalloz. Tous droits réservés pour tous pays.La reproduction ou représentation de cet article, notamment par photocopie, n'est autorisée que dans les limites des conditions générales d'utilisation du site ou, le cas échéant, des conditions générales de la licence souscrite par votre établissement. Toute autre reproduction ou représentation, en tout ou partie, sous quelque forme et de quelque manière que ce soit, est interdite sauf accord préalable et écrit de l'éditeur, en dehors des cas prévus par la législation en vigueur en France. Il est précisé que son stockage dans une base de données est également interdit.

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Currency composition of reserves, trade invoicing and currency movements

Cited by 26 publications

References 12 publications

Determinants of Currency Composition of Reserves: a Portfolio Theory Approach with an Application to RMB

Determinants of Currency Composition of Reserves: a Portfolio Theory Approach with an Application to RMB

The Multiple Effects of Capital Controls

Le degré d’internationalisation du Renminbi

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