Research On The Influence Of Currency Stability On Currency Internationalization—International Experience And Enlightenment

In October 2016,Renminbi actually became fifth currency making up SDR basket.However,as a long-term financial strategy,the internationalization of RMB still has a long way to go.What's worse,since the "8.11" reform in 2015,the process of RMB Internationalization has been obviously slowing down.On the other hand,the reform of the exchange rate system has been in a tough time.And the reform towards supply-side has been carried forward and deeper.The stability of RMB value has begun to suffer severe challenges,which may has a negative or indeterminate impact on the internationalization of RMB.In such situations,to discuss the impact of Currency Value Stability on Currency Internationalization is significant to RMB internationalization.Learning from the experience of the other four basket currencies internationalization,and through the theoretical analysis and the empirical test,this paper puts forward some reasonable policy suggestions and opinions to further promote the internationalization of RMB.The theoretical part of this article first makes a definition of Currency Internationalization and Currency Value Stability,which determined the main scope and the important premise of the study.And then,the article focus on the two aspects of Currency Value Stability,external and internal.The direct way of these two currency values influences Currency Internationalization.The possibility of Currency Value Stability promotes Currency Internationalization,through economic growth,expansion of trade scale and development of financial market.The theoretical analysis found:firstly,in the long term,the increase in external currency value can promote Currency Internationalization by causing economic growth,expanding the scale of trade' and improving the development of financial market.In the short term,the increase in external currency value is not conducive to the economic growth,and its impact on the scale of trade depends on the scale of net exports.As a result,the short-term impact of external currency value on the function of international trading media is full of uncertainty.Secondly,excessive fluctuation in external currency value is not conducive to Currency Internationalization.But such effect usually happens in the period of financial crisis and the reform of exchange rate system.The concrete influence of internal currency value on the internationalization of currency still depends on the specific cases.Thirdly,the rising inflation rate,which represents the appreciation of internal currency value,may stimulates the economic growth and financial market development in the short term.It helps the local currency to play the international trading media function.However,the short-term impact of inflation rate on this function through the scale of trade still depends on the net exports.From a long term point of view,the change in the internal value of local currency influences the Currency Internationalization,mainly through the change of external currency value,which measured by the exchange rate.Fourthly,when the independence of monetary policy is affected,the fluctuation of internal currency value becomes larger,which is not conducive to the internationalization of currency.Using the Feasible GLS in Panel Data,the empirical analysis has proved the influence of Currency Value Stability on Currency Internationalization.The sample period was quarterly data from 1999Q1-2017Q1.And the sample currencies included dollar,euro,yen and pound.The main analysis method was Medium Effect Analysis Method.On the one hand,under the actual economic background of United States,Europe,Japan and Britain,this part generally discussed the influencing mechanism of Currency Value Stability on the internationalization of currency,both external and internal.And the influence of the interaction between external and internal currency value on Currency Internationalization was also highlighted.On the other hand,the author also considered the effect of Currency Value Stability as an intermediary variable.It is possible that the economic growth,the expansion of trade scale and the development of financial market can influence the Currency Internationalization,through Currency Value Stability.The empirical study also found:firstly,during the financial crisis,the influence of external currency value fluctuation on the Currency Internationalization may exists,but relatively small.Secondly,the promotion of the rising external currency value to the function of international trading media will be suppressed by the rising inflation rate within the territory.The effect of inflation rate on the function of international valuation unit can only be achieved by increasing the external currency value.And the interaction between this two values has little influence on the international reserve currency function.Thirdly,except the influence of the currency values' interaction on the international valuation unit function,the rising inflation rate also has a negative effect on the function of international trading media,by affecting the size of the export.Fourthly,the monetary policy is highly independent in the US,Europe,Japan and Britain.And as a result,the volatility of internal currency value to these four countries' currency is relatively small,which has a limited impact on its Currency Internationalization.Fifth,external currency value appreciation caused by economic growth and the expansion of trade scale may has a positive impact on the function of international trading media.In conclusion,for a long time to promote the internationalization of currency,the external currency value needs to continue rising.And no matter external or internal,the value of the currency needs to remain relatively stable.Finally,based on the current situation of RMB value stability,combined with theoretical and empirical study results and drawing on the internationalization experience of dollar,euro,yen and pound,this article puts forward some corresponding countermeasures and suggestions.Firstly,persisted.in the reform of exchange rate system,while the capital account continues to open.Secondly,accelerated the financial deepening reform to form a financial market with breadth and depth.Thirdly,promoted the transformation of foreign trade structure actively and realized the economic growth driven by innovation.Fourthly,gradually realized the change of monetary policy from quantity regulation to price regulation.In the meantime,strengthened the independence of monetary policy.