RMB Internationalization Constraints Empirical Study

To promote all-around improvements to China's open economy is the important roleinthetransformationofChina'seconomicdevelopment.RMB internationalization is the important part in financial opening.But by comparing with the three indexes to measure internationalization of currency?COFER,BOND,FOREX?,we find the degree of RMB internationalization is still very low.We must focus on the problems that what are the constraints of RMB internationalization and how to make the RMB internationalization come true fast and safely.By comparing with America,European and Japan,the economic power and the development of financial market of China can't stand behind a kind of international currency.In order to find the constraints of RMB internationalization,we choose America dollar,euro and yen compared with RMB.According to three currency function,we determine general constraints and special constraints,then use pooled OLS,system GMM and Granger causality test to study empirically.We find the constraints of currency internationalization is changing with the degree of currency internationalization.From the result of pooled OLS and system GMM,economic power?include WGDP and TRADE?,the development of financial market?include CRED and STOC?,currency stability?SD?,RMB's network externality are in direct proportion to internationalization of RMB.Besides,military strength,FDI,degree of political stability and degree of capital account openness has a great promotion to internationalization of RMB.But volatility of real interest rate,supply of M₂ and inflation have a negative effect to internationalization of RMB.Internationalization of RMB is still at primary stage.Because China's economic should be improved on,the development of financial market is far from enough,authenticity of currency stability is insufficient,and the output of RMB doesn't reach due effect.From the result of Granger causality test,we find the interaction in currency internationalization and general constraints:to overcome the general constraints will accelerate currency internationalization,at the same time,the higher level of currency internationalization,the stronger power to promote economic to overcome the general constraints.China should continue to deepen the reform,improve the environment for investment,develop the intensive industry,create a new light spot or countermeasures to attract foreign investment.In other side,using bilateral and multilateral trade to expand cross-border RMB settlement and keeping RMB stable exchange rate gradually raise the level of RMB internationalization.