Sectoral Interests and Global Money: Renminbi, Dollars and the Domestic Foundations of International Currency Policy

Abstract

In deciding whether to support an international role of their country's currency, national policymakers are often influenced by lobbying from domestic sectoral groups. While these groups will be consistently more interested in some implications of international currency issuance than others, their specific preferences are likely to be highly context specific. Looking at the cases of the United States and China, we anticipate that domestic sectoral lobbying is unlikely to pressure either the US government to defend the dollar's international role vigorously or the Chinese government to internationalize the renminbi fully. From this domestic sectoral perspective, the future looks to be characterized by reluctant monetary leaders rather than increasingly aggressive currency competition between the United States and China.Keywords Money . Currency . Dollar . Renminbi . Sectoral groups JEL classification F33 . F59 . E42The future of the international monetary system will depend in part on whether policymakers in powerful countries (or regions in the case of the euro) actively support or oppose the international role of their respective currencies. Most existing literature assumes-either explicitly or implicitly-that policymakers rationally evaluate the benefits and costs of issuing an international currency on behalf of their polity as a whole. We know from historical experience, however, that policymaking in this area is influenced not just by calculations of the national (or regional) interest but also by lobbying from specific sectoral groups within issuing jurisdictions who experience these costs and benefits in different ways. Open Econ Rev (2012) 23:33-55

A Demand-Side Analysis of Renminbi Internationalisation: The Renminbi in South Korea

“…Chey (2013), for example, examines China's international power as a crucial determinant of renminbi internationalisation. Helleiner and Malkin (2012) explore the domestic political support in China for renminbi internationalisation. Eichengreen (2013) and Eichengreen and Kawai (2014) stress the impacts on renminbi internationalisation of China's domestic political institutions, such as its authoritarian political regime and the weak independence of the People's Bank of China (PBoC), its central bank.…”

“…Both indexes have revealed significant progress in renminbi internationalisation in recent years. 5 See, for example, Chen andCheung (2011), Chey (2013), Cohen (2012;, Dobson and Masson (2009), Eichengreen (2013), Helleiner and Malkin (2012), Lee (forthcoming), Mallaby and Wethington (2012), Park (2010), Wu (2009) and Wu et al (2010). 6 See, for example, Liao and McDowell (2013), Subacchi (2013) and Subramanian (2011a;2011b).…”

The Concepts, Consequences, and Determinants of Currency Internationalization

“…24 21 In fact, the constituents of the domestic supporters and opponents of currency internationalization in the United States, Japan and Germany all differed. For further details on this issue, see Helleiner and Malkin (2012). 22 One example is the Japanese government's drive for yen internationalization from the late 1990s.…”

“…One group focuses on the domestic politics of the issuing state. For example, Broz (1997) and Helleiner and Malkin (2012) address the domestic distributional effects of currency internationalization and the resulting formations of domestic coalitions with conflicting preferences related to it. As mentioned earlier, however, these two studies differ in that the latter opposes "comprehensive" generalizations of sectoral interests regarding currency internationalization, emphasizing that the specific preferences of domestic groups change in accordance with the contexts involved.…”

“…All of the countries that peg their exchange rates to the euro are EU membership candidates, for instance, with the exceptions of those in the CFA franc zone whose pegs to the euro are based on their foreign policy relations with France, their former colonizer (Posen 2008: 92). 37 See, for example, Chey (2012a;2013), Cohen (2009c;, Cooper (2009;, Dobson andMasson (2009), Eichengreen (2009a), Helleiner (2009), Helleiner andMalkin (2012), IMF (2010), Lee (2010), Wu (2009) and Wu et al (2010). 38 Chey (2013) points out that the US economy was more than twice as large as that of the UK in the early 1910s, when the dollar began emerging as a consequential international currency, and had grown to more than four times as big by the late 1920s when the dollar replaced sterling for the first time as leading international currency.…”