Prospects for Creating a Reserve Currency by the Shanghai Cooperation Organization Countries

Igor Sergeevich Ivanchenko ()
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Igor Sergeevich Ivanchenko: Rostov State University of Economics

Spatial Economics=Prostranstvennaya Ekonomika, 2024, issue 3, 128-153

Abstract: The purpose of this study is to clarify the prospects for the creation of a new reserve currency by the (Shanghai Cooperation Organization (SCO) countries to reduce foreign exchange costs in trade transactions, to strengthen integration processes in the Eurasian space, to increase the investment potential of developing Asian countries and to stimulate sustainable economic growth. The paper presents the results of mathematical modeling of the optimal portfolio structure of collateral assets with the possible issuance of a new reserve currency by the SCO countries. The article concludes that currently the best reserve assets that have been analyzed are the Chinese yuan, Indian rupee and gold. The expected return of the new reserve currency does not depend on fluctuations in the global foreign exchange market, and its calculated risk (standard deviation of return) turned out to be lower than the risk of fluctuations in the value of the yuan and gold. The article concludes that gold is the best collateral asset, as it has a stable positive yield, constant purchasing power and a fair value that is 4 times higher than the market value. It is proposed to issue a new reserve currency in the form of stablecoins so that it incorporates all the best properties of cryptocurrencies and fiat money

Keywords: Economic development; gold standard; Markowitz model; non-inflationary issue; fair value; Shanghai Cooperative Organization (SCO) (search for similar items in EconPapers)
JEL-codes: C51 E47 E51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:far:spaeco:y:2024:i:3:p:128-153

DOI: 10.14530/se.2024.3.128-153

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