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Yen internationalization and Japan's international reserves

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  • Zhang, Zhiwen
  • Makin, Anthony J.
  • Bai, Qinxian

Abstract

The relationship between major East Asian economies' international reserves and internationalization of their currencies presents a seeming paradox in international finance. While large international reserves may be expected to foster more widespread global use of a currency, strong growth of international reserves has been associated with very low Asian currency internationalization. Using the generalized method of moments (GMM) estimator we show the overall size of the Bank of Japan's international reserves, as well as the ratio of its foreign exchange reserves to international reserves, are negatively related to yen internationalization, while gold reserves and special drawing rights are positively related.

Suggested Citation

  • Zhang, Zhiwen & Makin, Anthony J. & Bai, Qinxian, 2016. "Yen internationalization and Japan's international reserves," Economic Modelling, Elsevier, vol. 52(PB), pages 452-466.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:452-466
    DOI: 10.1016/j.econmod.2015.09.026
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    1. Batten, Jonathan A. & Szilagyi, Peter G., 2016. "The internationalisation of the RMB: New starts, jumps and tipping points," Emerging Markets Review, Elsevier, vol. 28(C), pages 221-238.

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