Currency Internationalization From The Perspective Of Cross-border Financial Investment:Study On Measurement Construction And Impact Factors

Due to the deterioration of the international trade environment,the slowdown of China's economic growth and the pressure of RMB devaluation,the process of RMB internationalization has slowed down after 2015,and the driving force of trade has weakened.During this period,the huge investment and financing market brought by the "one belt and one way" strategy and the RMB's accession to the SDR basket created opportunity for RMB to became a denominated currency of non-resident cross-border financial investments.Then,how to measure and promote the internationalization of money effectively in the perspective of cross-border financial investment has become the key point of current research.This paper aims to provide an effective indicator of RMB internationalization from the perspective of crossborder financial investment for monetary authorities,and provide empirical evidence and policy recommendations for accelerating RMB internationalization by studying the impact factors.Firstly,by improving Lane's and Shambaugh(2010)foreign currency asset share model,this paper analyzes the driving factors of currency internationalization from the perspective of cross-border financial investment.Secondly,we construct an indicator to measure this kind of currency internationalization,which includes 21 currencies from 1993 to 2016.Then,we use dynamic heterogeneity panel model,which estimated by pooled mean group method,to test the short and long effect of each driving factor,and the differences of different currencies are compared.In addition,on the basis of differentiating investment channels,the fixed effect model is used to further identify the influencing factors of the cross-border investment function of currency under different channels.This paper has reached the following conclusions.Firstly,currency internationalization is positively correlated with exchange rate fluctuation,economic scale and negatively correlated with inflation in the short term.However,exchange rate volatility shows inhibitory effect in the long term.Asset returns,transaction costs measured by financial market development and capital control,and economic fundamentals are also significant long-term driving factors.Secondly,compared with small currencies,the internationalization of major currencies is more tolerant of exchange rate fluctuations,more sensitive to changes in the yield of high-risk assets(stocks).The internationalization of small currencies is negatively correlated with exchange rate fluctuations and capital controls.Finally,after differentiating investment channels,we find that non-residents' investment in foreign currency assets through stock investment channels is more sensitive to the changes of stock returns,financial market development and capital control;direct investment is strongly influenced by capital control and labor cost.The increase of economic scale can significantly promote the internationalization of all investment channels.The above conclusions indicate that in the path design of RMB internationalization,developing economy is the most effective way in the short term.In the long term,we can attract investment by increasing assets returns,as well as preventing big exchange rate fluctuations,promoting the development of financial markets and capital liberalization cautiously.When formulating the internationalization strategy of different investment channels,we can refer to the economic development situation and the objective conditions of financial market and capital control,then adopt flexible development model more pertinently.