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Internationalizing Like China

Christopher Clayton, Amanda Dos Santos, Matteo Maggiori and Jesse Schreger

No 17781, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We empirically characterize how China is internationalizing the Renminbi by staggering the entry of different types of foreign investors into its domestic bond market and propose a dynamic reputation model to explain this strategy. Our framework rationalize China’s strategy as trying to build credibility as an international currency issuer while reducing the cost of capital flight. We provide a sufficient statistic to measure countries' reputation over time and show that it can be estimated using micro data on foreign investors' portfolios. We use our framework to explore how countries compete to become a reserve currency provider.

Keywords: Capital controls; Reputation; Safe assets; Renminbi; Exorbitant privilege; International currency (search for similar items in EconPapers)
JEL-codes: E01 E44 F21 F23 F32 F34 G11 G15 G32 (search for similar items in EconPapers)
Date: 2023-01
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Working Paper: Internationalizing Like China (2022) Downloads
Working Paper: Internationalizing Like China (2022) Downloads
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