A Research On Influecing Factors Of International Reserve Currency

At present, The United Stats Dollar, Euro, Japanese Yen and Pound Sterling are the four main international reserve currencies in the world. Deutsche Mark, before the birth of the Euro, also had been one of the international reserve currencies. A country's currency, chosen as the international reserve currency, which is an affirmation around the world of its stability and mobility, is certainly a considerable element in international monetary system. Recently, with the rapid and sustained economic development and the gradual liberalization of external financial control in china, there are more and more demands for internationalization of RMB. To be an international reserve currency is exactly a significant part of currency internationalization.This thesis is on the study of the development process and current situation of those five main international reserve currencies. What's more, the paper defines the relationship between international reserve currency and monetary internationalization, as well as analyzes the advantages and disadvantages of international reserve currencies to issuing countries, to find influencing factors and formation mechanism of international reserve currency. Those influencing factors contain a nation's economic strength, international trade size, the stability of currency valuta, the scale of financial market, as well as a stable political situation and a strong political position. Finally, through the empirical analysis of the relationship between the structural changes in international reserve currency over the past decade and the influencing factors aforementioned by the exertion of the panel data regression model, those main factors are demonstrated that have great impact on international reserves currency. The greater a nation's economy is, the more advance international trade is and the more stable exchange rate is, the larger its issue currency occupies in the constitution of international reserve currency.Based on the theoretic analysis and practice demonstration, these aspects thereinafter should be focused on if RMB want to become an international reserve currency. At first, the free exchange of RMB should be achieved as soon as possible, which is the necessary condition for the international reserve currency; secondly, it is need to keep our country's economic growth; thirdly, maintaining the stability of RMB exchange rate is to establish the confidence among the world for RMB. In addition, develop and improve our financial markets, establish the Off-shore Financial Market of RMB; finally, developing international trade can effectively increase the foreign demand for RMB.