The Impact Of RMB Internationalization On Financial Imbalance

With the outbreak of the global financial crisis in 2008 and the implement of the United States quantitative easing policy,the global excess liquidity is exacerbating.It is urgent to change the current dollar-dominated international monetary system.In recent years,as one of the global largest economy and foreign trade body,RMB has been used more and more widely in trade with neighboring countries thanks to rapidly growing economic strength,rising international status and gradual relaxed external financial controls of China.The internationalization of RMB is a matter of necessity.RMB internationalization is a long,continuous process.From the view of geographical area,it generally needs to go through three stages,including the surrounding,regionalization and globalization.At present,China has achieved surrounding,and gradually transition to regionalization.But RMB internationalization is a double-edged sword,for our revenue but also contains huge risks,which directly reflected in the independence of the economic and financial policies,and gradually transfer to the economic and financial stability.From the angle of systemic financial risks,the article constructs a comprehensive index with the nature of early warning to describe financial imbalances specifically.The study has been explored the internal mechanism between RMB internationalization and financial imbalances.First,from the perspective of exchange rate fluctuations,capital flows and asset price volatility channels,the article verifies the existence of the direct and indirect effects channels between RMB internationalization and financial imbalances by employing the VAR model.And identify the most effective path within the system in accordance with the knock-on effects of financial imbalances.The study found that the degree of financial imbalances direct response to the RMB internationalization is not significant under the background of internationalization of the RMB.On the contrary,exchange rate fluctuation,capital flow and asset price volatility put a significant impact on financial imbalance and the asset price volatility is the strongest channel.At the same time,by mean of threshold model,the research got further exploration of their mechanism,which is a significant threshold effect between RMB internationalization and financial imbalances.When RMB internationalization and exchange rates fluctuations are on the low level,various transmission channels not have a significant impact on the financial imbalances.In contrast,when RMB internationalization and exchange rates fluctuations are on the high level,the impact of RMB internationalization and asset price volatility will gradually emerge.It is clear that the government has increased efforts on stabilizing asset price and preventing financial imbalance on the basis of favoring interest-rate liberalization and strengthening international capital flow supervision in the middle of RMB internationalization development.