The Study On The Effects Of Offshore Market In Currency Internationalization

Since the international financial crisis in 2008, the world gradually became aware of the shortcomings of the dollar hegemony, reforming the existing international monetary system has become the consensus of all countries. At the same time, China's economic strength continues to improve, and the international status of RMB is rising. Thus, accelerating the internationalization of RMB has its historical inevitability. This paper firstly analyzes the impact of the offshore market on the currency internationalization from a theoretical point of view, then summarizes the internationalization process of four international currencies - US Dollar, Euro, Japanese Yen and UK Pound Sterling, using the experience of these four currencies for reference. Then the relative data of US Dollar, Euro, Japanese Yen, UK Pound Sterling are selected and the panel data model whose standard error estimated by Driscoll-Kraay standard errors method is established to verify the relationship between the development of offshore market and the currency internationalization from the perspective of econometrics. Finally, on the basis of current situation and problems of RMB internationalization, this paper makes some specific and relevant recommendations to speed up the process of internationalization of RMB.The empirical results show that the economic strength of currency issuing countries, inflation, exchange rate, the degree of development of the offshore market have remarkable relationship with the internationalization of currency. The empirical analysis shows that the offshore market and the degree of internationalization of currency have significantly positive correlation, indicating that the development of offshore markets can promote currency. The results also verify that the economic strength of currency issuing countries can promote the internationalization of currency. However, high level of inflation and exchange rate have a reverse effect on the degree of internationalization of currency.Based on the theoretical analysis, international experience and empirical results and the important role of the offshore market in the process of internationalization of currency, this paper suggests that China should vigorously develop offshore RMB market, constantly increase economic strength, maintain the stability of RMB and accelerate the financial reform.