Why the Euro Will Rival the Dollar<sup>*</sup>

Chinn, Menzie David; Frankel, Jeffrey A.

doi:10.1111/j.1468-2362.2008.00215.x

“…Following Chinn and Frankel's (2008) analysis of the internationalisation of the euro, Lee adopts an economy's global shares of gross domestic product and trade, along with its degree of financial market development, price level and network externalities, as the major determinants of its currency's internationalisation. He also presents the forecast that, conditional on further development in terms of its convertibility, the renminbi can gradually become an international currency that accounts for around 3 to 12 per cent of the world's international reserves by 2035.…”

Section: Need For a Demand-side Studymentioning

confidence: 99%

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

Chey

¹

2014

SSRN Journal

0

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Abstract:As the internationalisation of the renminbi has progressed rapidly in recent years, research on it has also grown considerably. However, most of this research tends to focus mainly on analysing it from the supply side, looking, for example, at China's economic and political conditions and related policy measures. Meanwhile, the demand side of renminbi internationalisation remains underexplored. This study addresses this critical gap in the literature by providing an in-depth analysis of use of the renminbi in South Korea. It demonstrates that renminbi use in the country is still very limited in both the private and the public sectors. It also finds that neither sector has much intention of increasing its use of the renminbi in the near future, as its costs overwhelm its benefits. These findings suggest that, contrary to many optimists' anticipation, evolution of the renminbi into a consequential international currency even in East Asia may not be an inevitable outcome for China, despite the country's spectacular economic rise.

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“…Foremost among these are studies that address the reasons that countries accumulate or decumulate internatonal reserves. Aizenman (forthcoming), Eichengreen (2011), Chinn andFrankel (2008), and Dooley, Folkerts-Landau and Garber (2004) debate the angles of mercantilism, international insurance, or some variant of infant industry protection through undervalued currencies. Rodrik (2006) argues that holding such reserves comes at a high social cost.…”

Section: Related Research Themesmentioning

confidence: 99%

“…Much of the discussion, even from the academic side, focused on the role of the dollar in the international reserve holdings of central banks. Chinn and Frankel (2008) is one example of the reasoning behind evolving roles. They project that the dollar status has been based mainly on the growth trajectories of different regions and argue that, in the next decade, the euro could potentially rival or surpass the dollar.…”

Section: Introductionmentioning

confidence: 99%

The International Role of the Dollar: Does It Matter if This Changes?

Goldberg

2011

SSRN Journal

6

0

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThere is often speculation that the international roles of currencies may be changing. This paper presents the current status of these roles. The U.S. dollar continues to be the dominant currency across various uses. Yet, such a role may change over time. If this occurs, there could be consequences for seignorage returns, U.S. funding costs, the dollar's value, U.S. insulation from foreign shocks, and U.S. global influence. The paper concludes with a discussion of recent research on related themes and questions for future study.

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“…Even if there is a zero-sum game aspect as international currencies expand and decline in relative terms, the dynamics of the international monetary system are not just determined by competition with the dominant currency. This way of thinking was clearly wrong when, at the time of its creation in the mid1990s, the euro was seen as being in competition with the dollar and there was a debate about whether the euro could eventually overtake the dollar as the dominant currency (Bergsten 1997;McCauley 1997;Mundell 1998;Cohen 2003;Chinn and Frankel 2008;Papaioannou and Portes 2008;Posen 2008). …”

mentioning

confidence: 99%

Expanding Beyond Borders: The Yen and the Yuan

Subacchi

¹

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, the ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractAs all eyes are on the strategy and policy measures of the People's Republic of China (PRC) to push the international use of the yuan, this paper turns to the internationalization of the Japanese yen and compares it with what the PRC is doing. There are some fundamental differences in the regional context and in the pattern of regional integration, and these distinguish the PRC's current strategy from the Japanese experience in the 1980s. The yen's development as an international currency, and the comparison with the PRC's strategy, highlight the importance of regional integration as a way to overcome network externalities and market inertia. Using an analytical framework that assesses both the range of different roles (the scope) and geographical scale (the domain) of a currency in the global market, the paper suggests that economic fundamentals alone, albeit essential, are not sufficient to warrant a fully fledged scope and global domain of the currency. The paper concludes by suggesting that in the next decade the PRC yuan will become Asia's leading currency due to the PRC's deep economic integration in the region, and that the Japanese yen's function as an international asset and store of value can be further enhanced if Tokyo's competitiveness as a leading international financial center is improved.

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Why the Euro Will Rival the Dollar^*

Cited by 130 publications

References 20 publications

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

The International Role of the Dollar: Does It Matter if This Changes?

Expanding Beyond Borders: The Yen and the Yuan

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Why the Euro Will Rival the Dollar*

Cited by 130 publications

References 20 publications

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

The International Role of the Dollar: Does It Matter if This Changes?

Expanding Beyond Borders: The Yen and the Yuan

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Product

Resources

About

Why the Euro Will Rival the Dollar^*