The Renminbi's Role in the Global Monetary System

Eswar Prasad and Ye, Lei (Sandy)
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Ye, Lei (Sandy): Cornell University

No 6335, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze three related but distinct concepts concerning the renminbi's role in the global monetary system: (i) "internationalization" of the currency; (ii) currency convertibility; and (iii) reserve currency status. Their sequencing in relation to other policy goals such as financial sector reforms and exchange rate flexibility will affect their benefit-risk tradeoffs. We describe the measures taken and progress attained in each of these areas, and discuss the implications of these changes for the balance and sustainability of China's own economic development as well as the associated implications for the global monetary system. While China is actively promoting the internationalization of its currency, it is a long way from attaining full convertibility or meeting other prerequisites for achieving reserve currency status. Ultimately, China will proceed with capital account convertibility in its own controlled and gradual manner, with the goal being an open capital account but with significant administrative and other "soft" controls. The renminbi will play an increasingly important role in the international monetary system but is unlikely to displace the U.S. dollar anytime soon.

Keywords: international monetary system; reserve currency; capital account liberalization; convertibility; exchange rate flexibility (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Pages: 106 pages
Date: 2012-02
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 (14)

Published - published in: Proceedings of the 2011 Asia Economic Policy Conference, Federal Reserve Bank of San Francisco, 2011, 127-197

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Journal Article: The renminbi’s role in the global monetary system (2011)
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