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One Currency, Two Markets

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  • Lai,Edwin L.-C.

Abstract

This book is for anyone who is interested in the economic analysis of the future of the international monetary system and the USD, and the rising importance of the RMB. It points out the unsustainability of the dollar standard in the long run, that China has unique incentives to internationalize its currency, and how Hong Kong plays an important role. It explains the real reasons for China to internationalize its currency, including using external commitments to force financial sector reforms ('daobi' in Chinese). It applies economic theories accessible to laymen to establish that financial development and openness are crucial for RMB internationalization to succeed, and that greater exchange rate volatility is inevitable due to the 'open-economy trilemma'. Employing the 'gravity model', the book predicts quantitatively that the RMB is likely to be a distant third payment currency after the USD and the euro, but surpassing the Japanese yen in the next decade.

Suggested Citation

  • Lai,Edwin L.-C., 2021. "One Currency, Two Markets," Cambridge Books, Cambridge University Press, number 9781108491686, November.
    • Handle: RePEc:cup:cbooks:9781108491686
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    Cited by:

    1. Banco de España, 2020. "Report on the Latin American economy. Second half of 2020," Economic Bulletin, Banco de España, issue 4/2020.

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