Research On The Currency Anchor Effect Of RMB In The Belt And Road

Due to the defects of international institutions and the relative declines of developed countries’ economic power,adding that the negative impact of US dollar’s depreciation continues to increase,most developing countries are faced with the dilemma of insufficient supplies and structural imbalances in global public goods.Taking advantage of the historical opportunity,China has taken the initiative to undertake the task of providing public goods.By strengthening trade and capital flows with countries along the Belt and Road,the use of RMB in cross-border trade settlements and international reserves continues to increase.With the continuous advancement of RMB exchange rate system’s flexibility and China’s Capital Account Liberalization in the future,RMB exchange rate will have a greater impact on this region.Therefore,from the perspective of international currency selection,it is of great theoretical and practical significance to study the currency anchor effect of RMB in the Belt and Road.This paper first introduces the connotations and formation conditions of currency anchor,sorts out the theoretical bases of regional currency anchor selection,then discusses the necessity of reforming the existing international monetary system,as well as the feasibility and significance of RMB becoming the regional currency anchor.Finally,this paper improves the benchmark external currency model to a more detailed form,estimates the currency anchor effect of RMB and analyzes its main driving factors.The results show that since the Belt and Road initiative was put forward,RMB has become the regional "hidden currency anchor".The impact of RMB exchange rate system’s flexibility remains not stable.Excessive capital opening is not conducive to the stability of RMB’s currency anchor position.Geographically,RMB’s currency anchor effect is mainly concentrated in Asian.Economic strength,trade links,RMB exchange rate fluctuation and financial market development are important factors influencing RMB’s currency anchor effect,where the impact of economic strength dominates,the impact of financial market development is relatively stable.