The Influence Of Outward Foreign Direct Investment Upon The Internationalization Of Home Currency

With the development of China’s economy and it’s influence in the international economy gradually improved, the call for the internationalization of the RMB is higher. Under this background, the purpose of this paper is to explore the new influencing factor of currency internationalization, find out the difference between known and new factors.The flow effect of outward foreign direct investment(OFDI) has been one of the hot topics of economics research. However, use a currency outside the country also has been deepened as the development of economy and globalization. This gets more and more attention from China and the world. Firstly, in this paper, through reviewing the related literature, International economics of OFDI research about the economic impact upon the mother country has extended to the industrial structure, employment, technological progress, the export trade, balance of payments, foreign exchange reserves, and other fields. But, for the relation of OFDI and the home currency internationalization, the research which combine these two economics hot topic is few. The influencing factors of currency internationalization include the total amount of economic development, the rate of inflation, real interest rates, exchange rates to rise(fall) value and volatility, the influence factors of the foreign direct investment as a monetary internationalization, there is even very few research of scholars both at home and abroad. Therefore, the main research focus of this article is to analysis the foreign direct investment to be a influencing factor of currency internationalization as supplementary.Secondly, this paper theoretically analyzed the impact of foreign direct investment on monetary internationalization. With economies of scale, financial market scale, global foreign exchange market, currency stability as the bridge of foreign direct investment affect the currency internationalization. Theoretical analysis how foreign direct investment influence the stability of currency monetary internationalization by means of these four aspects above and built a complete theoretical framework about the impact of foreign direct investment upon currency internationalization.Later, based on the research of international trade, international finance and valuation and settlement of official foreign exchange reserves as evaluation index of the currency internationalization, the paper selected the United States, the euro zone, Japan as established cases as they carry on OFDI and did the empirical study of currency internationalization and OFDI. Firstly analyzed the leading countries’ foreign direct investment and monetary internationalization development. Then use hybrid panel data analysis method, the paper selected the dollar, euro and yen internationalization level to be explained variables, the United States, Japan and the euro zone’s foreign direct investment as the explained variable, to study the effect of foreign direct investment on the currency internationalization. The results showed that OFDI has a significant effect over their currency internationalization. Through the data of the dollar, euro and yen, combined with the theoretical framework, it is concluded that it is mainly through economic and financial market scale, foreign exchange and share among the four variables to achieve the stability of currency. Finally, the paper put forward policy recommendations, and discusses the internationalization of the RMB according to the related conclusion above.