Analysis Of The Relationship Between Currency Internationalization And Financial Risk

In the process of the development of the international monetary system,Pounds became the dominant currency in nineteenth Century.As the world factory,Britain has an absolute advantage in the global development of the industrialization and finance.Thus the pound became the hard currency and with the same status as gold.After the first World War,the dollar became the most powerful currency,after the Second World War the status of the U.S.dollar further enhanced.Then the U.S.dollar began as the core currency of the international monetary system.At the same time,Germany and Japan has gradually recovered,Japan's trade development gradually,Germany as the core countries in Europe,the German Mark,the yen has gradually become an important currency in the international monetary system.The birth of the euro compressed the space of the dollar in 2003.However,the currency internationalization is also facing all kinds of risks,such as the dollar shortage,dollar disaster.As the international monetary system is not reasonable,the financial crisis in 2007 spread to the world.In the process of internationalization of the Yen,Yen experienced serious risk of fluctuations in exchange rates and economic crisis.First,the concept of the international currency and financial risks were defined;then select the starting point of this paper through literature review and comments;and then analyzed negative relationship between the international currency and financial risk.At the same time,a positive relationship between the international currency and financial risks were analyzed;later,set the pounds sterling,US dollar,yen,mark as an example for the international currency and financial risk case studies,based on their experience and lessons summed policy implications;subsequently,empirical analysis in dollars samples for the international currency and financial risks,the first principal component analysis of financial risk quantification,and by examining the correlation coefficient and cross-correlation coefficients,verify international currency relationship with financial risks;and finally,recommended the RMB internationalization policy.The conclusion is that the relationship between the international currency and financial risk is not simply positive or negative.Currency internationalization processes in both countries have currency earnings,while also facing a variety of financial risks.Risk of currency internationalization in diversity,may face account imbalances risk,systemic risk,the risk of exchange rate fluctuations,capital import risk,monetary policy failure risk,currency substitution risk,the international community obstruct the risk,the probability of risk occurrence in the currency internationalization will increase.But at the same time,currency internationalization due to the increase of international seigniorage income,thus provided the impetus for the development of national economy;financial market more perfect will enhance the risk prevention ability of itself;because the political leverage and reputation increased,the currency countries are more likely to get help from the international community when the country is in the face of financial risks.International currency will not necessarily lead to financial risk;the country's economic and financial in different backgrounds,different financial risks occur;the same country vary in different stages of financial risks arising;international currency will help to resist financial risks;all financial risks triggered are not because of international currency.There is a significant correlation between currency internationalization and financial risk,and currency dependence,monetary growth rate,the current account deficit,large-scale flow of capital as well as the domestic and foreign spreads are all influencing factors of financial risk in the process of currency internationalization.