Estimation Of Equilibrium Return On Foreign Assets Of Emerging Economies

US dollar denominated assets is of super liquidity and safety, as well as supply insufficient quantity, while the latter is a result of global financial liberalization and innovation,but the instability flaw Triffin(1960) pointed out still exists. This paper estimates equilibriumreturn gap on emerging economies’ foreign assets, and explain how the instability andinequality flaw of current international monetary system causes the low return on foreignassets. The estimate result indicate that the periphery countries face a dilemma whenaccumulating US foreign reserve, the more reserve it accumulates, the lower return it receiveson the net foreign assets denominated in US dollar. Such phenomenon would change inmulti-currency international monetary system, but only to a little extent. Neither a singleinternational currency nor a basket of international currencies would be taken as a store ofvalue.So creating a super-sovereign currency as a stable reserve asset should be the ideal objectwhen reforming the international monetary system. Neither enhancing the international role ofSDR nor absorbing more currencies as member of SDR basket faces impassable obstacle.Meanwhile, as to the emerging economies, SDR reforming wouldn’t increase the return on netforeign assets much, and the effective way is to change the motive and the way whenaccumulating foreign reserve.Of course in the long run, due to the center countries’ exorbitant privilege, it’s destinedthat net return of the periphery countries’ net foreign assets would be lower than the centercountries. So as to China, promoting Renminbi towards an international currency andSDR-basket reforming would be the fundamental way to increase the return on net foreignassets.