Systemic Strengths, Domestic Deficiencies: The Renminbi’s Future as a Reserve Currency

McDowell, Daniel; Steinberg, David A.

doi:10.1080/10670564.2017.1337292

Cited by 23 publications

(14 citation statements)

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“…This conclusion complements the results of much current research on RMB internationalisation, which suggests that the RMB is not yet a genuine world money (Chey 2013 ; Cohen and Benney 2014 ; Eichengreen et al 2018 ; McDowell and Steinberg 2017 ; Cohen 2019 ). It provides further evidence to help understand why the RMB is not yet capable of mounting a full-scale challenge to the global role of the US dollar.…”

Section: World Money and The Welfare State: Insights And Further Resesupporting

confidence: 78%

“…On the one hand, many scholars at some point in their analysis conclude that the question of regime stability places a limit on how far the state can move to liberalise China’s financial system. Cohen ( 2012 ), for example, concludes his analysis of the future of the RMB by noting that rigidity in China’s political system places important barriers in the way of successful internationalisation (see also Eichengreen et al 2018 : 191‒93; McDowell and Steinberg 2017 : 810‒14; Cohen 2019 : 155‒60). On the other hand, questions connected to economic growth can foreshadow the kinds of distributional questions I pursue below, primarily because the size of China’s economy is directly related to the prospect of the RMB becoming an international currency.…”

Section: The Political Economy Of World Money: Conceptual Connectionsmentioning

confidence: 99%

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Welfare and world money: the domestic foundations of currency internationalisation

Germain

2020

J Int Relat Dev

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This essay explores the domestic foundations of currency internationalisation. I consider how a state that internationalises its currency might sustain the domestic economic and social costs of doing so. In particular I highlight the role of welfare provision as a neglected element of the domestic political economy of currency internationalisation. I examine the trajectory of welfare provision in Britain (1870-1930), the United States (1950-2020) and China (2000-2018), and use this data to consider some of the ways in which these costs might be related to the question of issuing world money. In this essay I suggest, first, that our conceptual framework for understanding currency internationalisation is strengthened when we consider welfare provision as an important element of the domestic foundation of issuing world money; and, second, that it is unclear whether the current level of welfare provision in China is adequate to meeting the costs to China of fully internationalising its currency as world money. This framework generates further insights about how China's challenge to American monetary leadership remains incomplete, and provides another angle of vision by which we might assess the multifaceted foundations of US dollar domination in the global political economy.

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Section: World Money and The Welfare State: Insights And Further Resesupporting

confidence: 78%

Section: The Political Economy Of World Money: Conceptual Connectionsmentioning

confidence: 99%

Welfare and world money: the domestic foundations of currency internationalisation

Germain

2020

J Int Relat Dev

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“…Little attention however has been paid to the effect of economic institutions such as CBI and how this affects globalization. In competing for foreign investment or multilateral lending, governments pursue strong currencies and lower inflation, in order to advance their countries' global prestige and attractiveness (McDowell and Steinberg, 2017). One way of achieving this is through CBI.…”

Section: Literature Review 31 Effect Of Cbi On Fdi Flowsmentioning

confidence: 99%

Financial globalization and institutions in Africa: the case of foreign direct investment, central bank independence and political institutions

Agoba

Agbloyor

Gyeke-Dako

et al. 2020

Journal of Institutional Economics

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In this paper, we examine the bi-directional relationship between financial globalization (proxied by foreign direct investment (FDI) flows) and economic institutions (proxied by central bank independence (CBI)) taking into consideration the role of political institutions. We test our argument on a sample of 48 African countries (1970–2012) using a two-step System Generalized Methods of Moments, with collapsed instruments and Windmeijer robust standard errors. Using two proxies for CBI, the study finds that while legal CBI does not have a significant impact on FDI, high central bank governor turnover rates have a significantly negative impact on FDI inflows. However, higher levels of political institutions significantly enhance the impact of legal CBI on FDI inflows, and dampen the impact of high central bank governor turnover rates on FDI inflows. The study also shows that, higher FDI inflows have a significantly positive impact on both legal and de facto CBI. This impact is accelerated in countries characterized by higher levels of political institutions.

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“…Chen and Cheung (), Cohen (, ), Dobson and Masson (), Park (), Subacchi () and Wu, Pan, and Wang (), for instance, explore the Chinese economic conditions for pursuing RMBI. Chey and Li (forthcoming), Helleiner and Malkin (), McDowell and Steinberg (), and Otero‐Iglesias and Vermeiren () examine the domestic politics in China surrounding RMBI, paying particular heed to domestic actors' preferences regarding it. Eichengreen (), Eichengreen and Kawai () and Prasad () consider how China's political institutions such as its authoritarian political regime will affect RMBI.…”

Section: The Literaturementioning

confidence: 99%

Which foreign states support the global use of the Chinese renminbi? The international political economy of currency internationalisation

2019

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The internationalisation of the Chinese renminbi has taken a path distinct from most cases involving previous international currencies, in that policy measures adopted by governments have played crucial roles in it. This paper conducts a cross‐country analysis of the factors that have led foreign governments to introduce three primary policy infrastructures to support renminbi use—renminbi swap lines, Renminbi Qualified Foreign Institutional Investor quotas and renminbi clearing banks. Our analysis shows that a state holding renminbi assets among its reserves or having more developed financial markets is likely to establish a higher level of policy infrastructure supporting renminbi use. We also find that a country's economic and political relations with China may have meaningful impacts on the level of its establishment of those renminbi‐related policy infrastructures. These findings significantly expand our understanding of renminbi internationalisation, by identifying which non‐Chinese factors have affected its progress to date. They also contribute meaningfully to the literature on currency internationalisation and international currencies in general, by calling attention to the roles of foreign states in the process of a currency's internationalisation.

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Systemic Strengths, Domestic Deficiencies: The Renminbi’s Future as a Reserve Currency

Cited by 23 publications

References 0 publications

Welfare and world money: the domestic foundations of currency internationalisation

Welfare and world money: the domestic foundations of currency internationalisation

Financial globalization and institutions in Africa: the case of foreign direct investment, central bank independence and political institutions

Which foreign states support the global use of the Chinese renminbi? The international political economy of currency internationalisation

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