Who Are the First Users of a Newly-Emerging International Currency? A Demand-Side Study of Chinese Renminbi Internationalization

Hyoung-kyu Chey, Geun-Young Kim () and Dong Hyun Lee ()
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Geun-Young Kim: Research Department, The Bank of Korea
Dong Hyun Lee: Economic Research Institute, The Bank of Korea

No 2016-19, Working Papers from Economic Research Institute, Bank of Korea

Abstract: Who are the first users of a newly-internationalizing currency? This issue, crucial to understanding the dynamics of the emergence of a new international monetary order, remains long underexplored in the existing literature, which tends to adopt a supply-side approach analyzing mainly the international currency issuers. Our study addresses this important question, with a focus on the case of the Chinese renminbi, by employing a demand-side approach examining the international currency users through generalized ordered logistic regression analysis. Our primary argument is that a state hosting a major global financial center--a condition largely independent of influence from countries issuing international currencies--is likely to be more interested in enhancing its use of the renminbi, implying thereby that global financial institutions and the related inter-state rivalries among international currency users may play crucial roles in the shaping of a new international monetary order. We in addition find significant impacts on a state's interest in renminbi use resulting from its institutional economic cooperation with China through a preferential trade agreement or a bilateral investment treaty, but that a country's mere trade and investment integration with China does not meaningfully affect its government's support for renminbi use.

Keywords: Currency internationalization; International currency; Renminbi internationalization; Yuan internationalization (search for similar items in EconPapers)
JEL-codes: F33 F50 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2016-12-23
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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