Currency Reversal And RMB International Network Influence Research

Taking Currency Reversal as the starting point of theoretical and logical analysis,this paper focuses on the emerging currencies under which situation can effectively expand their international use scale after entered the established international currency trading network,and partially or completely replace the use of incumbent international currencies in a certain region or globally.First of all,by reviewing the relevant literature on Currency Reversal and Currency Substitution,it is found that Currency Reversal is different from Currency Substitution.The former emphasizes the expansion of the international use of emerging currencies under certain conditions,but few scholars have conducted in-depth analysis on the concept of currency reversal.In addition,by sorting out the relevant theories and literature on currency internationalization and currency international use,it is found that although domestic and foreign scholars agree on the importance of currency network externalities for currency international use,they tend to interpret currency network externalities as currency inertia.The level of currency internationalization or the degree of use that lags one period is often used as a surrogate variable for network externalities.This research method has certain limitations.Therefore,based on the thought of System Theory,this paper analyzes the international use of currency in the international currency network,and finds more suitable substitute variables for the externality of currency network from a new perspective,and then lays a theoretical foundation for empirical analysis.Secondly,this paper introduces the theory of currency conversion cost for theoretical model derivation and analysis,and finds that there is a nonlinear threshold effect relationship between Currency Reversal and the network influence based on currency network externalities.Which means currency influence needs reach to a certain degree to promote Currency Reversal occurs,that is,effectively improve the international use of currency.Empirical analysis was then carried out to verify the conclusion of the theoretical derivation.The first step of the empirical analysis is to construct the influence relationship network of the currency international network based on the vector autoregressive model and using the generalized impulse response function.It is found that although it is difficult to surpass dollar to achieve a comprehensive Currency Reversal in the short term,a regional partial reversal can be derived under the cooperation framework advocated by my country,because the RMB has formed a good regional influence and has a certain foundation for reversal.The second step of the empirical analysis is to construct a panel threshold model based on highfrequency dynamic network influence data,which finally confirms that there is indeed a threshold effect between currency reversal and currency international network influence.It shows that it is necessary to cultivate the influence of the international network of RMB to a certain extent before the realization of currency reversal can be promoted,which explains to a certain extent the problem of deviation between theoretical expectations and practical results.Finally,based on the research conclusions,a series of relevant policy recommendations are put forward,aiming to consolidate the achievements of RMB internationalization and further enhance the degree of it.