The Benefits and Costs of Renminbi Internationalization

Liqing Zhang and Kunyu Tao

Finance Working Papers from East Asian Bureau of Economic Research

Abstract: Despite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk, promotion of the development of the financial market, and expansion of firms in the People’s Republic of China. The costs include general costs, which complicate monetary policy and exchange rate policy, and several transitional risks. We argue that the benefits of RMB internationalization should surpass its costs, particularly in the long run, and provide comprehensive policy choices for a sustainable process of RMB internationalization

Keywords: RMB; renminbi internationalization; International currency; financial market; PRC; transitional risks (search for similar items in EconPapers)
JEL-codes: F31 F36 F42 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-mon and nep-tra
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Citations: View citations in EconPapers (5)

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