| This dissertation explores the issue of international currency with monetary search theory, recently available dataset, and state-of-the-art empirical methodology.;The first chapter is focused on the currency choice in international trade. Previous literature normally emphasized economy size and openness, but that couldn't explain why RMB remains national while China is already leading in international trade. The role of financial development is highlighted. First, an empirical study with SWIFT dataset verifies the importance of financial development. Then a two-country monetary search model is built, in which trade takes time, and the lack of commitment makes exporter and importer rely on bank-intermediated finance. The agent's currency choice is related with terms of trade, monetary policy, and financial efficiency. Optimal monetary policy differs according to currency regime. Related topics such as size effect and global imbalance are also discussed.;The second chapter provides firm-level evidence. In theory part, the monetary search model is streamlined to focus on the choice of exporter and synthesize the macro, micro, and financial factors into a unified framework. In empirical part, it is found that financial factors significantly affect the patterns of currency usage, and exporters prefer the currency with a more developed financial market, especially for small firms in financial vulnerable sectors. Meanwhile, bad monetary policy and low bargaining power will hurt the popularity of currency, although empirically bargaining power has only a secondary effect.;The third chapter further investigates the currency choice in financial transaction. With SWIFT dataset, a gravity equation is estimated to explain the geographical distribution of international currency. For major currencies, economic integration and stable macroeconomic condition increase their international use. Specifically, trade and portfolio investment are more helpful in raising the direct use, while FDI works better in promoting the vehicle use. For RMB, trade improves the intensity of its use, and FDI increases its user number. The policy effect on RMB internationalization is significant only in enhancing the intensity of its direct use. Additionally, major currencies experience death of distance, whereas RMB use decreases in geographical distance, implying its role to be more regional during this period. |
