Internationalisation of the Renminbi as an Investing and a Funding Currency: Analytics and Prospects

Dong He, Sheung Kan LUK*, Wenlang Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This paper develops a three-currency model to study the determinants of the demand for assets and liabilites denominated in an international currency and to shed light on the prospects for the renminbi as a budding international currency. We show that interest rate differentials would be only one of the factors shaping the renminbi's position, while other factors, including the correlation between foreign countries' economic growth and their bilateral exchange rates against the renminbi, and the correlation between exchange rates of the renminbi with other international currencies, would also be important. A broad interpretation of these findings is that the renminbi will likely be attractive to investors from high-income economies and fund-raisers from emerging market economies.

Original languageEnglish
Pages (from-to)295-323
Number of pages29
JournalPacific Economic Review
Volume21
Issue number3
DOIs
Publication statusPublished - 1 Aug 2016

Scopus Subject Areas

  • Economics and Econometrics

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