A Quantitative Analysis Of International Reserve Currency Evolution And Research On RMB Internationalization

Since the reform and opening up,China is irsing international status with thesteady economic growth and overall national strength. At the same time, the renminbiin international recognition and acceptance is also increasing,which makes theinternationalization of RMB becoming the focus of scholars’ attention home andabroad.Atfer the outbreak of the global financial crisis, the US dollar continued toweaken, euro suffered an important hit,while yen and sterling remain in depressing，the internationalization of the RMB has got a great historic opportunity in suchcircumstance. It has draw more and more academia attention that to rebuild theinternational monetary system, accelerating the RMB internationalisation,andoccupied one place in the new international monetary system.RMBinternationalization is the process that renminbi across national boundaries,circulating abroad, then become a generally international recognition,settlement andreserve currency.To be an international reserve currency is the last stage of currencyinternationalization. RMB internationalization not only brings huge economic benefitsto China, but also improves the status on international stage and get more discoursepower. The dollar,euro,sterling and the yen are the four major international reservecurrencies in the world at present.To study the evolution of four major reservecurrencies and sum up the experience and lessons so as to choose a suitable path topromote RMB internationalization ultimately, is of great practical significance.This thesis starts from the definition and function of the international reservecurrency combined with the reserve currency development, then analyze the currencyhow to become international reserve,and ifnally conclude the influence factors. Thesefactors include the strength of a co’untrys economy, international trade scale, thestability of the monetary value, well-developed ifnancial markets as well as thehistorical inertia. We select four representative economic factors:the GDP share ofworld GDP, the trade ratio of world trade, the exchange rate volatility of thecurrency-issuing country and international bond share to do an empirical analysis of the change in the proportion of international reserve currency. It is proved that fourfactors have remarkable impact on the evolution of the international currency reserveshare.Finally, this article use the theory together with empirical analysis, analyze thecondition and feasibility of RMB internationalization.Considering the currentsituation we give policy suggestions to promote the further RMB internationalization.Base on sustainable economic growth,it is suggested that China should continue topromote cross-border trade and international trade settlement,try its best to join theSDR basket and improve the domestic financial market constantly, so as to create abetter environment for the internationalization of RMB.