Research On The Social Welfare Improvement Effect Of RMB Regional Currency Anchor

After President Xi Jinping put forward the “the Belt and Road” initiative,trade and investment between China and the rest of the world have gradually deepened,the circle of friends to jointly build the “the Belt and Road” has become larger and larger.At the same time,the RMB also plays an important role on the international stage.In2022,the weight of the RMB in SDR was increased,its rising trend is very noticeable.The structural defects of the current international monetary system make the countries participating in the joint construction of “the Belt and Road” realize that there is a big defect in only using the US dollar as a currency anchor.Countries need to seek new currency anchors.Many scholars have pointed out that many “the Belt and Road”countries have chosen to anchor the RMB.In this context,it is of great significance to study the impact of RMB anchor effect on social welfare in countries which take part in joint construction of “the Belt and Road”.Firstly,This study calculates the bilateral trade volume between 128 “the Belt and Road” co-construction countries and China,the trade dependence of these countries on China and the trade competition pressure exerted by China on them.The purpose is to illustrate the necessity for these countries to increase the weight of RMB in the anchored currency basket from the perspective of trade.Combined with the theory,the impact of RMB anchor effect on the welfare of these countries and one of its mechanisms are analyzed.Secondly,this paper uses the two-step Frankel Wei model and the state space model to measure the RMB anchor effect of these countries.Countries with significant RMB anchor effects and available data are selected,the data of them from 2009 to 2020 are used for empirical analysis,and a variety of methods are applied for robustness test.Thirdly,this paper constructs an econometric model to test the mechanism.Finally,this paper analyzes heterogeneity from three perspectives: before and after the “the Belt and Road” initiative,the level of trade dependence and the strength of trade competitiveness.The empirical results of this paper show that:(1)The RMB anchor effect of the“the Belt and Road” co-construction countries will promote their social welfare.(2)Through further research,it is found that after the “the Belt and Road” initiative was put forward,the facilitation of RMB anchor effect on social welfare of various countries is reflected;when countries have a high degree of trade dependence on China,the facilitation of RMB anchor effect on welfare is more significant;When the trade competitiveness of each country is low,the RMB anchor effect has a relatively strong role in promoting the social welfare of each country.(3)Through the mechanism test,this paper finds that the anchor effect of RMB can avoid the emergence of competitive depreciation of exchange rate,so as to increase the total export volume of each country,and then promote the rise of social welfare of each country.According to the research conclusions of this paper,China should continue to enhance the status of the RMB being a currency anchor and strengthen trade and investment exchanges with the “the Belt and Road” co-construction countries.Countries that rely heavily on China’s trade and whose export products are not highly competitive should increase the weight of the RMB in the currency basket,which is pegged by each country.