Renminbi Internationalization: Progress, Prospect and Comparison

20 Pages Posted: 2 Oct 2012

See all articles by Chen‐yuan Tung

Chen‐yuan Tung

affiliation not provided to SSRN

Guo‐chen Wang

National Taiwan Normal University - Humanities and Social Science

Jason Yeh

affiliation not provided to SSRN

Date Written: September‐October 2012

Abstract

Using principal component analyses, this paper constructs two internationalization indices for the renminbi (RMB) and 32 other major currencies. We find that the RMB's currency internationalization degree index (CIDI) is still low, and far behind the 4 most important international currencies. In 2009, it was ranked 18th among all important international currencies. However, in terms of the currency internationalization prospect index (CIPI), the RMB has remained the world's fifth highest since 2006. Although it is still far behind the US dollar and the euro, surpassing the ranking of the yen and the pound is possible in the near future. The dramatic difference in the ranking between the CIDI and the CIPI is a result of China's tight capital account control, the usage continuity of international currency due to network externalities, and the narrow foreign exchange and imperfect financial markets. Hence, to a large degree, the RMB's potential as an international currency depends on China's capital account liberalization.

Keywords: currency internationalization, currency internationalization degree index, currency internationalization prospect index, principal component analysis, RMB

JEL Classification: C1, F31, O24

Suggested Citation

Tung, Chen‐yuan and Wang, Guo‐chen and Yeh, Jason, Renminbi Internationalization: Progress, Prospect and Comparison (September‐October 2012). China & World Economy, Vol. 20, Issue 5, pp. 63-82, 2012, Available at SSRN: https://ssrn.com/abstract=2155516 or http://dx.doi.org/10.1111/j.1749-124X.2012.01302.x

Chen‐yuan Tung (Contact Author)

affiliation not provided to SSRN

No Address Available

Guo‐chen Wang

National Taiwan Normal University - Humanities and Social Science

Taiwan

Jason Yeh

affiliation not provided to SSRN ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
723
PlumX Metrics