The rise of a new anchor currency in RCEP? A tale of three currencies

Guo, Dong and Zhou, Peng ORCID: https://orcid.org/0000-0002-4310-9474 2021. The rise of a new anchor currency in RCEP? A tale of three currencies. Economic Modelling 104 , 105647. 10.1016/j.econmod.2021.105647

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Abstract

We propose a flow-based criterion (intensity of use) and a stock-based criterion (stability of value) for choosing an anchor currency. This conceptual framework is applied to analyzing the RCEP region. According to the estimated TVP-VAR model, the influence of the US dollar in the region was weakened during the global financial crisis and the COVID pandemic, creating an opportunity for both Chinese Yuan and Japanese Yen to compete for the anchor currency. In terms of the intensity criterion, China accounts for the largest share in the regional share, but Yen seems to have an upper hand in the stability criterion. The sophisticated cooperative-competitive relationship between China and Japan may prolong the birth of a new anchor currency. Before then, US dollar still holds the role and the RCEP regional trade is subject to excessive volatility.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0264-9993
Date of First Compliant Deposit:	22 September 2021
Date of Acceptance:	11 September 2021
Last Modified:	07 Nov 2023 00:10
URI:	https://orca.cardiff.ac.uk/id/eprint/144354

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