The impact of yuan internationalization on the stability of the international monetary system

Agnès Benassy-Quere and Yeganeh Forouheshfar

Journal of International Money and Finance, 2015, vol. 57, issue C, 115-135

Abstract: We study the implication of yuan internationalization on the stability of the international monetary system. More specifically, we use a three-country, three-currency portfolio model to analyze the impact of yuan internationalization on exchange rates in the event of trade shocks, with stock-flow adjustment of the net foreign asset positions. We show that the internationalization of the yuan would lessen the response of floating exchange rates to asymmetric trade shocks as well as attenuate the distortionary impact of China keeping its currency pegged to the dollar. Conversely, yuan internationalization would amplify the impact of trade shocks on net foreign asset positions, albeit to a limited extent.

Keywords: China; Yuan; Exchange-rate regime; Euro; Dollar (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Working Paper: The impact of yuan internationalization on the stability of the international monetary system (2015)
Working Paper: The impact of yuan internationalization on the stability of the international monetary system (2015)
Working Paper: The impact of yuan internationalization on the stability of the international monetary system (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:57:y:2015:i:c:p:115-135

DOI: 10.1016/j.jimonfin.2015.05.004

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