Research On The Influencing Factors Of US Dollar Internationalization At Different Stages

Since 2009,Chinese government has promoted the process of internationalization of renminbi with considerable force(see Appendix A for details).The process of internationalization of renminbi has shown a wave-like forward trend.However,according to renminbi internationalization index,issued by International Monetary Institute of Renmin University of China,the degree of internationalization of renminbi is still in its infancy.Thus,learning from the US dollar--the major international currency in contemporary world--is necessary and important.The paper is written as follows:Firsty,this article reviews literatures at home and abroad on the internationalization of currency and summarizes the factors at play,then proposes the innovations and deficiencies.Secondly,it explains the theoretical basis of internationalization of currency from different perspectives and illustrates the mechanism of various contributory factors in order to pave way for subsequent empirical analysis;Thirdly,on the basis of reading a large amount of literatures,we divides the evolution of internationalization of US dollar into four phases:The beginning stage of internationalization of US dollar(1870-1914),the historical opportunity period of internationalization of US dollar(1914-1945),the complete internationalization of US dollar(1945-1973),and the diversification of international currency under Jamaican System(1973-present);Fourthly,based on the previous three chapters,an empirical test is carried out;Finally,the enlightenment of internationalization of US dollar is drawn.Theoretical and empirical analysis results show that in different stages of the internationalization of US dollar,influence of various factors is different.At the beginning stage,the economic strength and the development level of UK's financial market have both played a positive role in promoting the internationalization of US dollar.However,development of US's own financial market in this period has hampered it.The increase in gross industrial production brought by the second technological revolution has no positive effect on the internationalization of U.S dollar;During the historical opportunity period,increase in gross industrial production has played a positive role in the U.S.dollar's internationalization.Excessive liquidity of domestic financial markets and holding of foreign official assets were negative.Official foreign credit was both positive and negative;At the third stage,official foreign credit and the large-scale of economic and military assistance and trade exports have all promoted the process of the internationalization of US dollar,while the status of pounds hindered it;In the era of Jamaican System,benefited from the rise of the oil dollar,the international status of the dollar was able to be solid,while the rise of the new currency,the yen,has had a strong impact on the international position of the US dollar.The moderate inflation rate has further consolidated the status of U.S.dollar,cause it enhanced the confidence of residents and non-residents in the value of U.S.dollar.