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The Rise of a New Anchor Currency in RCEP? A Tale of Three Currencies

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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.

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  • Guo, Dong & Zhou, Peng, 2021. "The Rise of a New Anchor Currency in RCEP? A Tale of Three Currencies," Cardiff Economics Working Papers E2021/23, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2021/23
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    1. Guo, Dong & Zhou, Peng, 2021. "Green bonds as hedging assets before and after COVID: A comparative study between the US and China," Energy Economics, Elsevier, vol. 104(C).
    2. Iqbal Murtza & Ayesha Saadia & Rabia Basri & Azhar Imran & Abdullah Almuhaimeed & Abdulkareem Alzahrani, 2022. "Forex Investment Optimization Using Instantaneous Stochastic Gradient Ascent—Formulation of an Adaptive Machine Learning Approach," Sustainability, MDPI, vol. 14(22), pages 1-13, November.
    3. Zhang, Chen & Fang, Ying & Niu, Linlin, 2022. "Changing anchor of the renminbi: A Bayesian learning approach to the decade-long transition," Economic Modelling, Elsevier, vol. 116(C).
    4. Zhang, Ying & Gong, Bing & Zhou, Peng, 2024. "Centralized use of decentralized technology: Tokenization of currencies and assets," Structural Change and Economic Dynamics, Elsevier, vol. 71(C), pages 15-25.
    5. Barbara Schuster & Siavash Radpour, 2022. "No "Great Resignation" for Older Workers- Mass Job Loss Drove the Retirement Surge," SCEPA publication series. 2022-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    6. Keddad, Benjamin & Sato, Kiyotaka, 2022. "The influence of the renminbi and its macroeconomic determinants: A new Chinese monetary order in Asia?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    7. Aleksandr V. Gevorkyan & Tarron Khemraj, 2022. "Dominant Currency Shocks and Foreign Exchange Pressure in the Periphery," SCEPA working paper series. 2022-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    8. Zhou, Peng & Guo, Dong, 2023. "Sanctions, Co-sanctions, and Counter-sanctions: A Multilateral, Evolutionary Game among Three Global Powers," Cardiff Economics Working Papers E2023/28, Cardiff University, Cardiff Business School, Economics Section.

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    More about this item

    Keywords

    RCEP; TVP-VAR; Anchor Currency; Internationalization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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