The Research On Currency Anchor Effect Of RMB In The East Asian Region

Since the Asian ifnancial crisis, East Asian countries and regions actively explorepaths and modes of monetary cooperation in East Asia, has made great progress.However, due to the lack of a strong currency in the region as a regional currencyanchor in East Asia, the progress of the East Asian economies in deeper monetarycooperation such as the currency exchange rate coordination and the establishment ofthe common currency zone have been slow. After the global ifnancial crisis, China’ssteady economic growth, the value of the RMB continued stability in the globalifnancial crisis and the Chinese government showed a high degree of responsibility,making the RMB’s international status and currency competitiveness have improved somuch. The RMB is the one of the core currencies of East Asian regional, and studyingits impact on the East Asian currencies, that is’，the RMB currency anchor effect in theEast Asian region，has signiifcance to promoting the deeper development of monetarycooperation in East Asia and the process of the RMB’ internationalization.From a practical perspective, China’s inlfuence in East Asia continues tostrengthen. However, in the existing literature, few scholars have in-depth study aboutthe RMB as the currency anchor of the East Asia region. This paper has an overviewof the theory of optimal currency area and currency competition theory on the basis ofcombing the literature. And then this paper analyzes the possibility of the RMBbecoming East Asian regional currency anchor, including the unsustainability of EastAsia’s peg to the U.S. dollar exchange rate system, the Comparison between thecurrency competitiveness of the RMB and the Japanese yen，and the realities of theRMB. Then this paper uses Structure Vector Autoregressive (SVAR) model to do theRMB’ currency anchor effect empirical analysis, through the variance decompositionof changes in currency exchange rates of the East Asian economies，to veriyf theextent of the RMB’ currency anchor effect in the East Asian region. Empirical resultsshow that, after the global ifnancial crisis, the impact of the RMB exchange ratechanges on the changes in currency exchange rates of other East Asian economiesincreases, and the impact of the Japanese yen exchange rate changes on the changes incurrency exchange rates of other East Asian economies is smaller than the RMB, socompared to the Japanese yen，the RMB is more potential to become a regionalcurrency anchor in the East Asia region. According to the conclusion, we suggest that, in order to promote the RMB tobecome the currency anchor of the East Asian region，China should correctly handlethe relations with the United States, Japan, ASEAN countries. At the same time,making the RMB to assume the role of the East Asian regional currency anchor, Chinashould also promote the further reform of the RMB exchange rate formationmechanism and the deepening of the reform of the domestic ifnancial system, andpush the pace of the regionalization and internationalization of the RMB. Theconclusion of this paper can only shows, after the global ifnancial crisis, the RMBhave a certain currency anchor effect in the East Asian region，and have the potentialto serve as a regional currency anchor in East Asia, and is the most appropriate toserve as the East Asian regional currency anchor in the core currencies of the EastAsian region.