IMF高级宏观经济学研修班课程

CurrencyInternationalizationPresenterTaoWuCTPTrainingProgramMacroeconomicManagementandFinancialSectorIssuesCT14.05第一页，共五十二页。ContentOutlineDefinitionofcurrencyinternationalizationObjectivesandbenefitsofcurrencyinternationalizationCostsofcurrencyinternationalizationEvolutionofaninternationalcurrencyRMBInternationalization2第二页，共五十二页。DefinitionofCurrencyInternationalization3MMF第三页，共五十二页。DefinitionofInternationalCurrencyAnationalcurrencyisregarded“internationalized”ifitplaystheroleofmoneyoutsidethecountrywhereitisissued.Mediumofexchange;Unitofaccount;Storeofvalue;Methodofpayment.Foranoperationaldefinition,itmaybeusefultoidentifyqualificationsforaninternationalcurrency.Capitalaccountconvertibility;norestrictionsoncurrencytrading,spotorforward;Littleornorestrictionsonforeigners’accesstodomesticfinancialmarkets;Largevolumeoftradeandfinancialassetsfromtheoriginatingcountry;Theissuerhasthebargainingpowertodenominatetradeinitscurrency;Welldevelopedfinancialmarketwithalargevarietyofrisk-hedginginstruments;breadthandliquidity;Stabilityofvalue:long-runpricestability(lowinflation)andlowexchangevariability.4第四页，共五十二页。CapitalAccountConvertibilityCapitalaccountconvertibilitymaybeaprecondition,butitdoesnotautomaticallyleadtocurrencyinternationalization(CI).IMFdefinestheterm“convertible”as“freelyusableforthesettlementsofinternationaltransactions”.Unlessthecurrencyiswidelyusedininternationaltransactions,itdoesnotfunctionasaglobalunitofexchange.Thedegreeofacurrency’sactualusageisthemostcriticalcriterion:Itsshareinthedenominationofinternationaltradeandfinancialassets;Foreignholdingsofthecurrencyasinternationalreserves.Bythisstandard,evenJapaneseyenisyetafullyfledgedinternationalcurrency.5第五页，共五十二页。InternationalReserves(%ofTotal)6Source:IMFAnnualReports第六页，共五十二页。QualificationsforInternationalReservesSizeofGDPTheU.SdollarisdominantEuroquicklybecamethesecondkeycurrencyStabilityofvalueTheprospectoftheeconomyEurovs.YenFinancialdevelopmentMaynotbesocriticalEurovs.Britishpound7第七页，共五十二页。FinancialAssetDenomination(MoneyMarket,%ofTotal)8Source:BISQuarterlyReview:variousissues.第八页，共五十二页。FinancialAssetDenominationTheUSdollarhaslostitsdominance.Theeurohasbecomethedominantcurrency.ThepoundsterlinghaslostitskeycurrencypositiondespiteLondonbeingaglobalfinancialcenter.9第九页，共五十二页。TradeDenomination

UnitedStatesUnitedKingdomJapanGermanyFranceAustralia

ExportImportExportImportExportImportExportImportExportImportExportImport1980US$96.085.017.029.065.793.07.232.320.337.1

Euro..........Yen0.21.00.11.30.00.10.7Home96.085.076.038.029.42.482.543.060.537.1

Other3.814.06.910.324.719.125.1

1992US$92.080.022.022.046.674.57.318.416.523.1

Euro..........Yen1.53.00.72.440.117.01.3Home92.080.062.043.040.117.077.055.954,646.7

Other6.517.015.332.613.38.515.424.028.128.9

2000US$

29.034.052.470.7

42.657.268.051.4Euro

21.019.06.11.2

44.6Yen

..36.123.5

..0.85.2Home

46.042.036.123.5

44.632.928.628.3

Other

4.05.05.44.6

12.82003US$

90.3

48.068.324.133.933.646.967.547.9Euro

2.0

9.34.663.055.252.7Yen

.

38.925....0.93.6Home

90.3

38.92563.055.252.745.327.832.6

Other

7.7

10.96.510Source:BankofKorea,Kawai

(2008),Kamps(2006),EURC第十页，共五十二页。DeterminantsofTradeInvoicingTradedgoodsaremorelikelytobeinvoicedbyexporter’scurrenciesExchangerateriskismorecriticalforexporters.Producercurrencypricingismorelikelyiftradedgoodsaremoredifferentiated.Demanduncertaintyislowerformoredifferentiatedgoods.Morehomogeneousgoodssuchasoilandotherprimarycommoditiesarelikelytobeinvoicedinaveryfewkeycurrencies.11第十一页，共五十二页。ObjectivesandBenefitsofCurrencyInternationalization12MMF第十二页，共五十二页。1.ReducingforeignexchangeraterisksDomesticagentsengagedinforeigntrademaybeabletoreduceforeignexchangerateriskstotheextentthattheirexportsandimportsareinvoicedintheirowncurrencies.Domesticborrowers(financialinstitutionsandfirms)couldalsoborrowintheirowncurrencies,therebyavoidingcurrencymismatchintheirbalancesheets.The1997Asianfinancialcrisisdemonstratedthatmacroeconomicshockscouldbeamplifiedbythebalancesheetaggravationinthebankingsector.Yetwiththedevelopmentoffinancialderivativeproducts,suchbenefitsbecomelower.13第十三页，共五十二页。2.CollectingseignioragerevenuesCountrieshavingmajorinternationalcurrenciesalsoreapthebenefitsofcollectingseignioragerevenuesfromforeignholdingsoftheircurrencies.ChinnandFrankel(2007)findthatthesharesaredeterminedbytheeconomicsizeofthecountry,inflationrate,exchangeratevariability,andthesizeoftherelevantfinancialcenter.Asfarasemergingeconomiesareconcerned,sincetheyarewellbehindintermsofthesedeterminants,thisbenefitislikelytobeinsignificant.14第十四页，共五十二页。3.DevelopingdomesticfinancialinstitutionsDomesticfinancialinstitutionsmaygainanedgeovertheirexternalcompetitionsindealingintheirowncurrency.Onceanumberoffinancialassetsdenominatedintheirowncurrenciesareissuedandfreelyexchangedforforeigncurrencies,moreopportunitiesinglobalfinancialintermediationopenupfordomesticfinancialinstitutions.Somepolicymakersconsidercurrencyutilizationasawaytodevelopthefinancialinstitutions.15第十五页，共五十二页。4.EstablishinganinternationalfinancialcenterSomeemergingeconomiesmayfinditnecessarytointernationalizetheircurrenciestoholdaregionalfinancialcentersomewhereontheirsoil.Forexample,Koreahasbeenpursuinginternationalizationofitscurrencyintheexpectationofhostinganinternationalfinancialhub.However,CIdoesnotnecessarilyleadtotheestablishmentofafinancialcenter.Inthecaseoftheeuro,afullydevelopedinternationalfinancialcenterislocatedinLondon.Singapore’snon-internationalizationpolicyalsoillustratesthatCIisnotanecessaryconditionforthedevelopmentofafinancialcenter.Restrictionsofcross-borderasset-sidebanklendingofSingaporedollarstonon-residentsortoresidentswhereSingaporedollarsweretobeusedoutsideSingapore,untilthelate1990s.16第十六页，共五十二页。SummaryofObjectives/BenefitsLayingthefoundationforareservecurrencyAvoiding“originalsin”ImprovingcompetitivenessofexportsoffinancialservicesasregionalorglobalfinancialcentercountriesSpeedingupfinancialdeepeningReducingforeignexchangeraterisksSeignioragerevenuesHoldingsmalleramountsofreserves17第十七页，共五十二页。BenefitsmaynotbelargeforemergingeconomiesDemandforinternationalcurrencyismarketdrivenCurrencydenominationisdeterminedbyeconomicfundamentalsandforeigndemandCIisnotanecessaryconditionforaregionalfinancialcenter.Examples:EuroandSingaporedollar.SmallerreserveholdingsarenotnecessarilyrelatedtoCIAustraliahascontractedastheUSFed18第十八页，共五十二页。CostsofCurrencyInternationalization19MMF第十九页，共五十二页。I.CostsinvolvedwithcapitalaccountliberalizationandfinancialderegulationOneofthenecessaryconditionsforCIisliberalizationofcapitalaccounttransactions.Deregulationofcrossborderinvestmentswouldprovidealevelplayingfieldforbothforeignanddomesticmarketparticipants.ForeigninvestorsarenotsubjecttoanyrestrictionsinbuyingandsellingdomesticfinancialinstrumentsinbothdomesticandoffshoremarketsLikewise,domesticresidentsareaccordedthesameopportunitiestoparticipateinforeignfinancialmarketsbothaslendersandborrowers.20第二十页，共五十二页。EffectsofCapitalAccountLiberalizationGrowthBenefitsFinancialliberalizationleadstoflowsofcapitalfrom(advanced)economieswithlowratesofreturnoncapitalto(emerginganddeveloping)economieswithhigherreturns,therebycomplementinglimiteddomesticsavingsandloweringthecostofcapitaltoaugmentdomesticinvestmentinthelatter.Koseetal.(2006)arguethattherearecertainthresholdconditionsemergingeconomiesaretomeetinordertoreapgrowthbenefitsfromfinancialmarketopeningsuchasdevelopedfinancialmarkets,highqualityofinstitutionsandgovernance,andtradeintegration.Question:Isthecountrysufferingfromalackofdomesticsaving?21第二十一页，共五十二页。EffectsofCapitalAccountLiberalizationFinancialStabilityIncreasingcapitalaccountliberalizationhasincreasedthevolatilityofcapitalflows,posingseriousimpedimentstofinancialstability.Sincetheeruptionofthe2008crisis,capitalflowsinmanyEastAsianeconomieswithfullyandpartiallyopencapitalaccountshavebecomemoreunstablethanbefore,causingahighdegreeoffluctuationsofstockpricesandexchangerates.TolargeforeignprivateandinstitutionalinvestorsoperatingoutofEastAsia’sregionalfinancialmarkets,theirinvestmentsinanindividualemergingeconomyoftenaccountsforaverysmallshareoftheirtotalglobalinvestments,yetpossiblyalargepartofthelocalmarketsandcanthereforeeasilydictatemovementsoffinancialpricesincludingtheexchangerate.22第二十二页，共五十二页。EffectsofCapitalAccountLiberalizationInternationalReserveHoldingsIntheory,countrieswithinternationalizedcurrenciesandfreefloatingwouldnotneedtoholdasmuchreservesascountrieswithinsularcurrencies,becausetheycanusetheirowncurrenciestosubstitutefordollarliquidity.Countrieswithinternationalizedcurrenciese.g.U.K.,EuroArea,CanadaandAustraliaholdverysmallamountsofFOREXreserves,borrowingexternallytofinancetheircurrentaccountdeficits,althoughthereareexceptionssuchasJapan.Butacountry’scapacityforexternalfinancingislikelytobedeterminedbyitseconomicfundamentals(debtsustainability),notbyitscurrencystatus.Example:Australia23第二十三页，共五十二页。EffectsofCapitalAccountLiberalizationSummaryLittlerobustempiricalevidenceoneconomicgrowthManyempiricalstudiesshowfinancialmarketinstabilitycausedbycapitalaccountliberalizationSmallcountrydilemmaFreefloatingcannotfullydeflectexternalshocks24第二十四页，共五十二页。II.IncreaseinexchangeratevolatilitySinceCIpredisposestheemergenceofoffshorecurrencymarkets,emergingeconomiesmayhavetoendureanincreaseinthevolatilityoftheirexchangerates.Theexchangeratewouldmoverespondingtochangesintheforeigndemandforthedomesticcurrencyresultingfromforeignshocksnotassociatedwithdomesticconditionsoftheeconomy.Theoppositecouldbethecase:byenlargingtheforeignexchangemarket,CIcanactuallycontributetomorestabilizationoftheexchangerate.WhetherCIwillleadtoincreasedvolatilityoftheexchangerateornotisthereforeanempiricalquestion.25第二十五页，共五十二页。III.IncreasedvulnerabilitytocurrencycrisisSomeemergingeconomiesmaybecomemorevulnerabletocurrencycrisesifforeigninvestorsholdwidelydomestic-currencyfinancialinstruments.Ifforeigninvestorsarehitbyaliquiditysqueeze,theymaybeforcedtoselldomestic-currencyassets,puttingpressureontheexchangeratetodepreciate.CIcanresultinprovidingspeculatorswithmoreinstrumentstobeusedforspeculativeattacksonthecurrency.Aftertheforeigninvestorsintentionallyraisefundsbyissuingfinancialdebtsortakeashortpositiondenominatedinthedomesticcurrency,theycansellthedomesticcurrencyintheforeignexchangemarkettodrivetheexchangeratedown.26第二十六页，共五十二页。IV.ComplicationsformonetarypolicymanagementAnadditionalsourceofmoneydemandbyforeignersmaycomplicatethemonetaryauthorities’managementofmonetarypolicy.Ifthemonetaryauthoritieschangemoneysupplywithouttakingintoconsiderationexternaldemand,theymaynotabletosetthelevelofmoneysupplythatitintendedtotargetinthedomesticeconomy;GermanandJapanin70s.Possiblecounter-argument:monetarypolicy’smainoperatingtargetistheinterestrate,notthemoneystock,ifinflationtargetingistheframeworkofmonetarypolicyoperation.Indeed,thedifficultyofconductingautonomousorindependentmonetarypolicyisnotduetoCIperse,butmoregenerallyduetocapitalaccountliberalization:theImpossibleTrinity(Mundell1963).27第二十七页，共五十二页。CostsofCIcanbelargeCostsinvolvedwithliftingrestrictionsoncapitalaccounttransactionstogetherwithderegulationofthedomesticfinancialsystem.IncreaseinvolatilityofexchangerateIncreaseinfinancialvulnerabilityComplicationsinmanagementofmonetarypolicyWhenthebenefitsarebalancedagainstcostsofinternationalization,strongcaseforCIinemergingeconomiescannotbemade.28第二十八页，共五十二页。EvolutionofanInternationalCurrency29MMF第二十九页，共五十二页。EvolutionofanInternationalCurrencyHowtotransformaninsularcurrencyintoaninternationalmediumofexchange?Defactoprocess:theAustraliandollarDejureprocess:theJapaneseyenWhyhasJapanfailedtoelevatetheyentoreservecurrencystatus?Whyhastheeurobeenacceptedasareservecurrencyfromthebeginning?HastheBritishpoundeclipsedasakeycurrency?30第三十页，共五十二页。ExperienceofJapaneseYenDespitestronginitiativesfromtheJapanesegovernment,theinternationalstatusofyenhadchangedverylittleinthepasttwodecades.EvenwithinEastAsia,JapaneseYenhasnotbeenabletobecomethedominantcurrencyintradesettlement.U.S.dollarismuchmorewidelyused,eveninJapanesetradewithEastAsiathanistheyen.EastAsiaremainsaverystrongdollarzone.Forinstance,In2002,80.6%ofKoreanimportsand86.3%ofexportswereinvoicedinU.S.dollar,andonly12-13%ofimportsand5.2%ofexportswereinvoicedinYen,althoughJapanisatleastasimportantatradingpartnerastheUS.Why?31第三十一页，共五十二页。ExperienceofJapaneseYenThechoiceofinvoicecurrencywasdeterminedbyvariousfactors,includingmarketpower,matchingofproductexportsandmaterialimports,internationalpricesettingpractice,preferencesofimportersandexporters,etc.Inparticular,a)rawmaterialsconstitutealargeshareofJapan’simports;b)thecurrenciesofAsiatendedtofluctuatemorewiththeyenthanwiththeUSD;c)thereislittleneedforyenloansbecausemosttradeisnotdenominatedinyen.Determinantsofcurrencychoiceinfinancialtransactions:thelevelofinterestrates,marketexpectationsaboutprospectiveexchangeratemovements,etc.Currencychoiceofreserveholdings:themostimportantfactorseemstobeexchangeratemanagementpractice.32第三十二页，共五十二页。EvolutionofanInternationalCurrencyHowtotransformaninsularcurrencyintoaninternationalmediumofexchange?Defactoprocess:theAustraliandollarDejureprocess:theJapaneseyenWhyhasJapanfailedtoelevatetheyentoreservecurrencystatus?Whyhastheeurobeenacceptedasareservecurrencyfromthebeginning?HastheBritishpoundeclipsedasakeycurrency?33第三十三页，共五十二页。CIandFinancialandMonetaryCooperationandIntegrationinEastAsiaFinancialmarketintegrationLiberalizationofcrossborderinvestmentwillpromoteintegrationofEastAsia’sdomesticfinancialmarketswithoneanotherandwithglobalfinancialmarketsEquallyimportantfortheintegrationareconstructingregionalfinancialinfrastructureincludingasettlementsystem,andharmonizingmarketpracticesandwithholdingtaxesCompetitionforhostingafinancialcenterCIisnotanecessaryconditionItisamarket-drivenratherthanagovernment-orientedprocess.Countrieswithinternationalizedcurrencieshaveacompetitiveedge34第三十四页，共五十二页。CIandFinancialandMonetaryCooperationandIntegrationinEastAsiaCIandmonetaryintegration–privilegesofreservecurrencycountriesExceptfortheyen,currenciesofotherAsiancountriesarepoorsubstitutesfortheUSdollarandeuroincreatinggloballiquidityEventheyenhasalimitedcapacityofcomplementingtheUSdollarinsupplyinggloballiquidityUnlikethoseintheUSandEuroarea,AsianinstitutionsareexposedtoinsolvencyriskswhengloballiquidityvanishesAsiancountriescouldjoineitheraUSdollaroreurobloc(Unrealisticoption)Alternativelytheycouldconstructamonetaryunionamongthemselves.AccordingtoShirono(2009),theRMBcould

playtheroleofananchorcurrencyinsuchaunion.35第三十五页，共五十二页。SummaryItisimportanttoarticulatetheobjectiveofCIItisimportanttodeterminethereadiness,efficiencyoftheinstitutionsrequired,andorderofcapitalaccountliberalizationbeforeembarkingonCIAdejureprocessmayrequireabigbangstylecapitalaccountliberalizationAdefactoprocessmaybeconsistentwithagradualapproachCreatingoffshoremarketswherenon-residentscanissueandtradefinancialinstrumentsdenominatedinthedomesticcurrencyisthelaststageofCI.36第三十六页，共五十二页。RMBInternationalization37MMF第三十七页，共五十二页。MotivationsLong-rungoal:forRMBtoultimatelyattainaninternationalstatusthatiscommensuratewithChina’seconomicweightandtradescale.Background:Highcurrentaccountsurplusesandrisingcapitalinflowshavecontributedtotherapidaccumulationofreserveassets,primarilydenominatedintheU.S.dollar.Substantialincreasesinintra-emergingmarketstradeandcapitalflows,forinstance,withintheAsianregion.Chinesecapital“goingout”:increasedneedsforoutwarddirectandportfolioinvestmentbyChinesefirmsandindividuals.ChineseeconomyandRMBbecamemoreattractiveamidstthemostrecentfinancialcrisisintheU.S.andEurope.38第三十八页，共五十二页。MonetaryConsiderationsRMBinternationalizationmayalsohelpovercometheso–called“conflictedvirtue”problem

(theinabilityofacreditorcountrytolendinitsowncurrency):IfinternationaltradeinparticularexportscanbeinvoicedinRMB,thenCAsurpluseswillnotleadtoaccumulationofdollar-denominatedassetsonthePBC’sbalancesheet.Capitaloutflowscanalsohelpalleviatedomesticliquiditypressure;ifoutflowscanbedenominatedinRMB,betterERrisksharingwillencouragemoreoutwarddirectandportfolioinvestment.39第三十九页，共五十二页。AGradualistApproachAthree-stepstrategyforRMBinternationalizationhasbeenplanned:Intermsoftargetedregions: SurroundingcountriesAsianregionworldwideIntermsofthefunctionsofRMBabroad: InvoicecurrencyInvestmentvehicle Reservecurrency40第四十页，共五十二页。ProgresssinceMid-2009Sincemid-2009,thePBChaslaunchedanumberofinitiativestospeeduptheprocess,including:PromotingRMBsettlementoftradetransactions;EasingrestrictionsinRMBcross-borderremittancefortradesettlement;AllowingtheissuanceofRMB-denominatedbondsinHongKongandbyforeignersinMainland;PermittingselectedbankstoofferoffshoreRMBdepositaccounts;Settinguplocalcurrencybilateralswithothercentralbanks.41第四十一页，共五十二页。TheamountofRMBtradesettlementrosefrom506.3billionin2010to3.16trillionRMBinJan-Sep2013(atanannualrateofmorethan4trillionRMB),accountingforabout16%oftotaltradevolumes.42Progress:RMBasTradeSettlementCurrency第四十二页，共五十二页。Theimbalancebetweenimportsettlementandexportsettlementhasimprovedinthelasttwoyears:2010-2011,RMBsettlementprimarilyconcentratedinimports(85%-90%)insteadofexports;2013:Q3:importsettlementaccountsfor60%,stillsubstantiallyhigherthanexportsettlement.Possiblyreflecting:Market’sexpectationsofRMBappreciation;Hidden“carrytrade”transactionsbetweenMainlandcompaniesandtheiroverseasubsidiaries;Lackofmarketpowerinexports.43Progress:RMBasTradeSettlementCurrency第四十三页，共五十二页。InOctober2013,RMB’smarketshareintradefinance,orLettersofCreditandCollection,roseto8.66%,overtookeurotorankthesecondafterU.S.dollar(81.08%).ThesharpriseinRMB-denominatedtradefinancingpartlyreflectsinterestratearbitrageactivitiesandtheevasionofcapitalaccountbarriers.TheRMBremainedthe12thpaymentscurrencyoftheworld,withaslightlydecreasedshareof0.84%,comparedwith0.86%inSeptember2013.ClearlytheRMB’smarketsharewillincreasesharplywithfurtherliberalizationofcurrencyandcapitalcontrols.44Progress:RMBasTradeSettlementCurrency第四十四页，共五十二页。Triffin(1960):Whenanationalcurrencybecomesaninternationalreservecurrency,therecouldbeconflictsbetweenshort-termdomesticandlong-terminternationalobjectives:ThecountryneedstorunCAdeficitstomeetforeigners’reservedemandforthecurrency;However,continuedCAdeficitsweakeninvestors’confidenceonthecurrency.TheU.S.experienceduringthe1950sto1970s.Today,Triffin’sdilemmamaynolongerholdinthestrictsense,butitdoesinabroadsense.Chinafacesasimilardilemma:Long-runobjective:needtomaintainanexpectationofRMBappreciationtopromoteRMBoversea;Short-runconcern:continuedappreciationmayleadtodeclinesinCAsurplusesandweakeneconomicgrowth.45Triffin’sDilemma第四十五页，共五十二页。Off-shoreRMBdeposits:730billionRMBatHKinSep.2013,10%oftotaldepositbalancesatHK;Singapore(5%);Taipei(155billionor4%),London(0.4%).RMBloanbalancesatHK:30billionin2011,79billionin2012,expectstoexceed100billionin2013.RMB-denominatedFDI:OutwardDIinRMB:21.9billionRMB($3.6billion)during2013:H1,comparedtoatotalODIflowof$42.1billionduringthesameperiod(about8.5%);InwardFDIinRMB:controlsrelaxedinSeptember2011;269.4billionRMB($44billion)during2013:Q1-Q3,comparedtoatotalFDIflowof$164.5billionduringthesameperiod(about27%,rosefrom7%in2011:Q4).46Progress:RMBasInvestmentVehicle第四十六页，共五十二页。FinancialportfolioflowsinRMBOutward:RMB-denominatedbondissuanceatHK,Singapore,andLondon2012:148.2billionRMB($2.4billion);ThepopularityofdimsumbondsseemstohavecorrelatedwithRMBappreciationexpectation;Lacksanactivesecondarymarket;InwardthroughapilotRQFIIprogram.Dec.16,2011:Atotalof20billionRMB,atleast80%ofwhichneedtobeinvestedonfixed-incomesecurities.BySep.2013,42foreignfirmshadobtainedatotalquotaof134billionRMB.Oct.2013:London-basedquotaexpandedto80billionRMB(stock,bond,andmoneymarket);Singapore-based:50billionRMB.47Progress:RMBasInvestmentVehicle第四十七页，共五十二页。IncreaseddemandforRMBasreservecurrency;Swithforeigncentralbanks.Since2009:HK,Japan,Korea,Australia,Malaysia,theU.K.,etc.October9,2013:currencystheECB--350billionRMB/45billioneuro.Totalamount:2.8trillionRMB.RMBincludedintheSDRbasket?Needstobeconvertibleoratleast“freelyusable”atfirst;possibleinthenearfuture.48Progress:RMBasReserveCurrency第四十八页，共五十二页。AChecklis