Reserve Currency Blocs: A Changing International Monetary System? / Camilo Tovar Mora, Tania Mohd Nor.

Format:

Book

Government document

Author/Creator:

Tovar Mora, Camilo.

Contributor:

Mohd Nor, Tania.

International Monetary Fund, issuing body.

Series:

IMF Working Papers; Working Paper ; No. 2018/020

IMF Working Papers

Language:

English

Subjects (All):

Foreign exchange rates.

International finance.

Monetary policy.

Physical Description:

1 online resource (43 pages)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2018.

Summary:

What is the extent of currency diversification in the international monetary system? How has it evolved over time? In this paper, we quantify the degree of currency diversification using regression methods of currency co-movements to determine the extent to which national currencies across the world belong to a reserve currency bloc. We then use these estimates to calculate the economic size of each currency bloc. A key contribution of our paper is that we quantify the size of the Chinese renminbi bloc. Our analysis suggests that the international monetary system has transitioned from a bi-polar system - consisting of the U.S. dollar and the euro - to a tri-polar one that includes the renminbi. The dollar bloc is estimated to continue to dominate, having the largest share in global GDP (40 percent), followed by the renminbi (30 percent) and the euro blocs (20 percent). The geographical area of influence for the RMB bloc appears to be most evident among the BRICS’ currencies. The British pound and the Japanese yen blocs appear to play minor roles.

Contents:

Cover

Contents

Abstract

I. Introduction

II. Methodology and Data

A. Allocating currencies to a currency bloc

B. Calculating the size of a currency bloc

C. Data and estimation

III. Econometric Results

A. Reserve currencies' influence of across the world

A view without the RMB-Frankel and Wei's (1994) approach

A view with the RMB-Kawai and Pontines' (2016) approach

B. Dynamics of currency blocs over time

C. Economic size of currency blocs

Currency bloc's economic size measured by the absolute influence of reserve currencies

Currency bloc's economic size measured by the relative influence of reserve currencies

D. Robustness analysis

Alternative numeraire currency

Controlling for additional reserve currencies

Controlling for a wider set of reference currencies for the RMB

Additional Controls

IV. What Determines the Relative Importance of Reserve Currencies?

A. The U.S. dollar bloc

B. The euro bloc

C. The renminbi bloc

V. Conclusions

Annex

References.

Notes:

Includes bibliographical references.

Description based on publisher supplied metadata and other sources.

Description based on print record.

ISBN:

9781484339336

1484339339

9781484339374

1484339371

OCLC:

1039681820