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The geographic distribution of international currencies and RMB internationalization

Qing He, Iikka Korhonen, Junjie Guo and Fangge Liu

No 20/2015, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: The paper investigates the determinants of geographical distribution of international currencies in global financial market transactions. We implement a gravity model, in which international currency distribution depends on the characteristics of the source and destination countries. We find that the source country's currency is more likely to be used in the financial market transactions of the destination country if the bilateral trade and capital flows are large or the destination country's economy is the larger of the two. We also find that the level of development of the destination country's financial market and whether the two countries use a common language are important determinants of the currency distribution. In addition, our model suggests that, to be a true international currency, the renminbi should be used more extensively in the financial markets of the US and UK.

JEL-codes: F33 F36 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: The geographic distribution of international currencies and RMB internationalization (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2015_020

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