The Quantitative Analysis Of Currency Internationalization Degree

This paper establishes a network model of global exchange rates and furtherly calculates the Currency Internationalization Index on the base of correlations between currency exchange rates of every economy. Using the latest four years data, this paper introduces the operation procedure of this method, and explains the results in detail. Furthermore, this paper does the dynamic analysis for every currency's Internationalization Index using the historical data and the method of scrolling to sampling. The five currencies, including U.S. dollar, Euro, sterling, Japanese yen and RMB, which are also selected as the constituent part of SDR, are discussed particularly. This method is different from any other method that is created to measure the degree of currency's internationalization. As the theory of the method is based on the assumption about investors' behavior, it is a kind of method less affected by the subjective judgement.The internationalization level of U.S. dollar is the highest, and Euro has maintained the similar level of U.S. dollar since it was issued, however, Euro's internationalization level has dropped recently. Sterling is of less and less international influence and is hardly called "international currency" nowadays. Under the impact of Plaza Accord, the trend of Japanese yen's internationalization index appeared to increase sharply and then come down unsteadily. The real internationalization index of RMB is way from the one of international currency, but the rapid fluctuations and the long-term trend are both going up. To raise the internationalization level of RMB, the government should borrow Euro's ideas, learn yen's lesson and take long-term measures with reforming exchange rate institutions instead of short-term heavy-handed measures.