Reserve Currency Blocs: A Changing International Monetary System?

Camilo Tovar () and Tania Mohd Nor

No 2018/020, IMF Working Papers from International Monetary Fund

Abstract: What is the extent of currency diversification in the international monetary system? How has it evolved over time? In this paper, we quantify the degree of currency diversification using regression methods of currency co-movements to determine the extent to which national currencies across the world belong to a reserve currency bloc. We then use these estimates to calculate the economic size of each currency bloc. A key contribution of our paper is that we quantify the size of the Chinese renminbi bloc. Our analysis suggests that the international monetary system has transitioned from a bi-polar system - consisting of the U.S. dollar and the euro - to a tri-polar one that includes the renminbi. The dollar bloc is estimated to continue to dominate, having the largest share in global GDP (40 percent), followed by the renminbi (30 percent) and the euro blocs (20 percent). The geographical area of influence for the RMB bloc appears to be most evident among the BRICS’ currencies. The British pound and the Japanese yen blocs appear to play minor roles.

Keywords: WP; currency bloc; U.S. dollar; Internatinal Monetary System; proxy determinant; dollar bloc; currency movement; currency internationalization; RMB internationalization; FF currency bloc; euro bloc; yen currency bloc; currency diversification; currency basket; numeraire currency; Monetary unions; Reserve currencies; Currencies; International monetary system; Numéraire; Global (search for similar items in EconPapers)
Pages: 42
Date: 2018-01-24
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Citations: View citations in EconPapers (15)

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