Trade finance and international currency

Tao Liu ()

MPRA Paper from University Library of Munich, Germany

Abstract: The determinants of international currency received a lot of academic attention since great recession, especially given China's intention to internationalize RMB. Recent empirical studies in history and international economics confi�rmed the importance of �nancial market development in this process. To provide micro-foundation for such observation, I built a two-country monetary search model with �nancial friction. Trade takes a long time, and the lack of trust makes importer and exporter rely on bank-intermediated �nance. The choice of international currency is related with terms of trade, monetary policy, and �nancial market development. The eff�ect of monetary policy on international trade di�ffers according to currency regime. Related topic such as size eff�ect and capital account liberalization is also discussed.

Keywords: International currency; RMB internationalization; monetary search (search for similar items in EconPapers)
JEL-codes: E42 F33 F41 (search for similar items in EconPapers)
Date: 2015-05-14
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
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https://mpra.ub.uni-muenchen.de/64362/1/MPRA_paper_64362.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/64385/1/MPRA_paper_64385.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/68162/1/MPRA_paper_64385.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/68524/1/MPRA_paper_68524.pdf revised version (application/pdf)

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