Financial Opening, Characteristics Of Emerging Economies And Currency Internationalization

Since the unified management of foreign exchange reserves began in 1994,China has always adhered to the investment philosophy of diversification and diversification of foreign exchange reserves.The structure of foreign exchange reserves is increasingly diversified.According to the Annual Report of the State Administration of Foreign Exchange(2019),the proportion of US dollar fell from 79% in 1995 to 58% in 2015,while non-US dollar currencies rose from 21% to 42% in the same period.This paper first defines the connotation and characteristics of emerging market economies,and then analyzes the influencing factors of currency substitution rates in the emerging economies.Combining the experience of major international reserve currencies,this article focus on the study of the characteristics of emerging economies and currency reference anchors that influence the share of major reserve currencies.Though analyzing currency internationalization by combining reserve currency countries,emerging economies,global macro risks,and other perspectives on reserve currency shares and currency reference anchors,This paper will provide policy recommendations for China's currency internationalization under the influence of trade frictions and the threat of globalization.After analyzing the international experience of major international currencies as reserve currencies,the focus will be shifted to the study of the characteristics of emerging economies and the degree of financial openness that affect the share of major reserve currencies.Examine the long-term effects of debt and investment on the possibility of reserve currencies and test their effectiveness,so as to provide policy recommendations for China and emerging economies in the world facing threats to trade friction and globalization in China.The first chapter is the introduction,which summarizes the research background and significance of the full text,clarifies the research ideas and content of the whole article,and introduces the research methods,summarizes the research innovations and contributions.The second chapter is a literature review and analysis.This chapter summarizes the causes and influencing factors of financial opening and currency substitution.Based on the relationship between capital account opening and currency internationalization,based on the main conclusions and research methods of the existing literature,make a review and summarize the improvement of this article and propose the innovation of this article.The third chapter analyzes the influencing factors of currency substitution in emerging economies.Currency substitution is a common phenomenon in emerging economies.Based on the traditional currency substitution model,This chapter has taken some extentions.Risk aversion and capital openness have profound effects on currency substitution in emerging economies.The risk aversion sentiment and capital account openness variables added to traditional currency substitution models prove that under the macroeconomic conditions of global capital flows,investors' risk aversion has indirectly deepened currency substitution in emerging market economies.In comparison,inflation does not seem to be the main reason for investors in emerging market economies to choose currencies.In the practice of inflation-targeted monetary policy,emerging economies have been able to effectively defend their negative effects on the deepening of the currency substitution rate.The fourth chapter uses the test analysis of the time series VECM model to analyze the effect of currency substitution and trade opening in the linkage between exchange rate and economic prosperity.For China,currency substitution mainly affects the rate of change of the domestic production index significantly.The degree of trade openness has no significant effect on the rate of change of the domestic industrial added value index,but significantly affects the rate of change of the exchange rate.During the period from 2010Q1 to 2018Q3,China basically kept a small currency replacement rate,with an average value of 2.57%,and China's foreign trade openness was 22.6%.On the whole,China has maintained a current account surplus.For our country,currency substitution and trade openness show a negative correlation.China's economy is gradually prosperous and the economy is relatively high.To a certain extent,it can reduce China's currency substitution and increase trade openness.In the macroeconomic internal and external equilibrium,China should drive the exchange rate change rate and keep the exchange rate at an equilibrium level by stabilizing economic growth and prosperityChapter 5 conducts a panel data linear analysis of the dollar reserve currency share based on factors such as financial openness and currency substitution.The empirical analysis results show that the size of the US financial market has no direct significant impact on the performance of the dollar reserve currency share.At a significance level of 1%,the depth of the US financial market will positively affect the reserve currency status of the US dollar.The rise in the global share of US import trade has effectively hampered the hegemony of the US dollar reserve currency,with significant negative effects.Increasing the global share of export trade will increase the reserve currency share that effectively promotes the US dollar in emerging economies.From a trade perspective,in recent years,the Sino-US trade war and the European-American trade friction have all contributed to the United States' efforts to reduce the deficit in order to maintain the status of the US dollar currency.Reducing imports and promoting exports are the current direction of US authorities.In terms of the characteristics of emerging economies,the increased openness of capital accounts in emerging economies is conducive to increasing the reserve currency share of the US dollar.At the level of currency substitution,currency substitution has weakened the dollar reserve share.A possible explanation is that residents' foreign exchange deposits do not count as foreign exchange reserves,and currency substitution is the proportion of foreign currency denominated deposits(mainly US dollars)in the broad money supply.With certain asset allocation scale requirements,the increase in US dollar deposits has a negative impact on official US dollar reserves.In terms of debt,the proportion of short-term debt output is obviously inferior to the proportion of external debt stock.The overall flow of debt is less affected by the stock of external debt.In addition,the global panic index vix has largely contributed to the dollar's share as a reserve asset.In the context of global panic,many of the wealth of emerging economies are allocated to US dollar bonds,and the risk-averse nature of US dollar bonds has caused yields to fall or even be reversed.In the context of the ever-changing international monetary system,the promotion of RMB internationalization requires comprehensive trade channels and financial channels.Against the background of the continuous advancement of domestic interest rate marketization and exchange rate marketization,China needs to promote the opening up of capital accounts in an orderly manner and strengthen the RMB Reflow capability.Chapter 6 analyzes the currencies of emerging economies with reference to "hidden anchors",and analyzes the drivers and influential factors of currency internationalization from the perspective of "hidden anchors".The research in this chapter shows that the coefficients of the exchange rate changes of emerging market economies with reference to the anchor order which is US dollar,euro,pound sterling,yen,and renminbi.Currency changes are more significant with reference to the traditional four major international currencies and are basically in line with the old version(RMB has not yet been formally included in the basket)SDR currency basket weight ordering of currency weights.Changes in currency exchange rates of emerging economies with reference to RMB exchange rates are not significant.It shows that the renminbi has not yet acted as a stable currency reference anchor for emerging market economies.Emerging market economies' trade openness,currency substitution rates,and capital account openness have not played a role in promoting the anchoring of the RMB currency exchange rate.Emerging market economies' current account balance as a percentage of GDP can significantly promote the reference of RMB exchange rate changes to their currency changes.As China 's original foreign exchange system reform decoupled from the US dollar in 2005 and 2016,after more than ten years of development,the renminbi was finally included in the SDR currency basket.Sample studies as of 2017 show that the renminbi has become a representative The currency reference rates of the emerging economies have a long way to go.Chapter 7 summarizes the research content and conclusions of the full text.Based on previous research,we provide policy recommendations for our future financial opening and channels for bilateral cooperation with emerging market economies.First,China needs to deepen financial market reforms for the internationalization of the renminbi,while improving the infrastructure for the internationalization of the renminbi,and facilitating cross-border capital flows.In addition,orderly advance the convertibility of capital accounts through monetary policy adjustments,improve the monetary and exchange rate policy framework for the cross-border business of RMB,better promote the comprehensive opening up of China's capital market,and do a good job of "going out" and "introducing" RMB The related work is also very important.Second,in terms of trade,China needs to consolidate its core position in the global trading system through the “Belt and Road” strategy.