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Trade finance and international currency

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  • Liu, Tao

Abstract

The determinants of international currency received a lot of academic attention since great recession, especially given China's intention to internationalize RMB. Recent empirical studies in history and international economics confi�rmed the importance of �nancial market development in this process. To provide micro-foundation for such observation, I built a two-country monetary search model with �nancial friction. Trade takes a long time, and the lack of trust makes importer and exporter rely on bank-intermediated �nance. The choice of international currency is related with terms of trade, monetary policy, and �nancial market development. The eff�ect of monetary policy on international trade di�ffers according to currency regime. Related topic such as size eff�ect and capital account liberalization is also discussed.

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  • Liu, Tao, 2015. "Trade finance and international currency," MPRA Paper 64362, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64362
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    References listed on IDEAS

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    More about this item

    Keywords

    International currency; RMB internationalization; monetary search;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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