Reserve Currency Blocs: A Changing International Monetary System?

January 24, 2018

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Format: Chicago

Camilo E Tovar Mora, and Tania Mohd Nor. Reserve Currency Blocs: A Changing International Monetary System?, (USA: International Monetary Fund, 2018) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

What is the extent of currency diversification in the international monetary system? How has it evolved over time? In this paper, we quantify the degree of currency diversification using regression methods of currency co-movements to determine the extent to which national currencies across the world belong to a reserve currency bloc. We then use these estimates to calculate the economic size of each currency bloc. A key contribution of our paper is that we quantify the size of the Chinese renminbi bloc. Our analysis suggests that the international monetary system has transitioned from a bi-polar system - consisting of the U.S. dollar and the euro - to a tri-polar one that includes the renminbi. The dollar bloc is estimated to continue to dominate, having the largest share in global GDP (40 percent), followed by the renminbi (30 percent) and the euro blocs (20 percent). The geographical area of influence for the RMB bloc appears to be most evident among the BRICS’ currencies. The British pound and the Japanese yen blocs appear to play minor roles.

Subject: Currencies, Economic integration, Global financial crisis of 2008-2009, International monetary system, Monetary unions, Money, Numéraire, Reserve currencies

Keywords: Currencies, Currency basket, Currency bloc, Currency diversification, Currency internationalization, Currency movement, Dollar bloc, Euro bloc, FF currency bloc, Global, Internatinal Monetary System, International monetary system, Monetary unions, Numéraire, Numeraire currency, Proxy determinant, Reserve currencies, RMB internationalization, U.S. dollar, WP, Yen currency bloc

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/020
Stock No:

WPIEA2018020
ISBN:

9781484338704
ISSN:

1018-5941

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