1. Currency Internationalization and the International Price System
- Author
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Jin, Hailong, Takumah, Wisdom, and Jorenby, Josiah
- Subjects
Product price ,Pricing -- Analysis ,Monetary policy -- Analysis ,Globalization -- Analysis ,Money -- Analysis - Abstract
Although China, now the world's second largest economy and largest goods trading nation, has rolled out the ambitious currency internationalization protocol while maintaining strict capital controls for nearly a decade, the implications of this unique reform path on the international economy still present uncertainties. In this paper, we fill in this gap by developing a two country, two-goods model to investigate the impacts of currency internationalization on the international price system, which consists of goods market and factor market interactions. We propose a critical condition of sustainable currency internationalization and reveal high international price sensitivity to exchange rate adjustments. Keywords Currency internationalization * Currency intervention * RMB JEL E3 * E5 * F3 * F4 * F6, Introduction After the devastating 2008-09 global financial crisis, many monetary economists urged diversification of the international monetary system to reduce its over-reliance on single currencies, especially U.S. dollar (e.g., Zhou [...]
- Published
- 2018
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