Abstract
On November 30, 2015, the IMF Executive Board completed its regular five-year review of the basket of SDR currencies. A key focus of the 2015 review was whether the RMB met the existing criteria to be included in the basket. The Board decided that the RMB met all existing criteria, recognized it as a freely usable currency, and included it in the SDR basket as a fifth currency, along with the US dollar, the euro, the Japanese yen, and the Great Britain pound. The new SDR basket would take effect on October 1, 2016, to provide sufficient lead time for the IMF, its members, and other SDR users to adjust to the changes.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
A currency can be widely used and widely traded even if it is subject to some capital account restrictions (in the past, currencies such as the pound sterling, and Japanese yen were determined freely usable when some capital account restrictions were in place). On the other hand, a currency that is fully convertible may not necessarily be widely used and widely traded.
- 2.
Zhou Xiaochuan, Governor of PBOC, pointed out at the High-level Seminar on the International Financial Architecture in March 2016 that China would release foreign exchange reserve data denominated in the SDR in addition to the USD and would also explore issuing SDR-denominated bonds in the domestic market.
- 3.
Lu Lei, 2014. Monetary Theory and Optimal Policy Based on Micro-Level Analysis, China Finance (22).
- 4.
The 16 currencies in the 1974 basket include the USD, the Deutsche mark, the Japanese yen, the French franc, the British pound, the Dutch guilder, the Canadian dollar, the Belgian franc, the Swiss franc, the Australian dollar, the Danish krone, the Spanish peseta, the Norwegian krone, the Austrian shilling, and the South African rand. In 1978, the IMF adjusted the SDR basket and replaced the Danish krone and South African rand with Iranian riyal and Saudi Arabian riyal.
- 5.
Garber, Peter M., The Use of Yen as a Reserve Currency [J]. Monetary and Economic Studies, 1996 December: 1–21.
- 6.
Kawai, M., The Japanese Yen as an International Currency: Performance and Prospects [J]. Organization, Performance and Equity Research Monographs in Japan – US Business & Economics, 1996 (1): 305–355.
- 7.
Frankel, Jeffrey. A. and Wei, Shang-Jin, Yen Bloc or Dollar Bloc? Exchange Rate Policies of the East Asian Economies, in Takatoshi Ito and Anne O. Kruger, eds. Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, Chicago: University of Chicago Press, 1994: 295–329.
- 8.
Taguchi, H., On the Internationalization of the Japanese Yen, in Takatoshi Ito and Anne O. Kruger, eds. Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, Chicago: University of Chicago Press, 1994: 335–355.
- 9.
Fukuda, S. and Cong, J., On the Choice of Invoice Currency by Japanese Exporter: The PTM Approach [J]. Journal of the Japanese and International Economies, 1994 (8): 511–529.
- 10.
Sato, K., The International Use of the Japanese Yen: the Case of Japan’s Trade With East Asia [J]. The World Economy, 1999, 22 (4): 547–584.
- 11.
Ministry of Finance, Council on Foreign Exchange and Other Transactions, Internationalization of the Yen for the 21st Century—Japan’s Response to Changes in Global Economic and Financial Environments, 1999.
- 12.
Oi, Hiroyuki, Otani, Akira and Toyoichiro Shirota. The Choice of Invoice Currency in International Trade: Implications for the Internationalization of the Yen [J]. Monetary and Economic Studies, 2003 (October): 27–64.
- 13.
Hamada, K. and A. Horiuchi, “The Political Economy of the Financial Market”, In Kozo Yamamura and Yasukichi Yasuba, (ed.), The Political Economy of Japan, The Domestic Transformation: Stanford University Press, Vol. 1, 1987.
- 14.
Iwami, T. and Sato, K., The internationalization of the yen: with an emphasis on East Asia [J]. International Journal of Social Economics, 1996 (23): 192–208.
- 15.
Hooper, P., Johnson, K. and Marquez, J., Trade Elasticities for G-7 Countries [R]. International Finance Discussion Papers, No. 609, 1998.
- 16.
Hummels, D., Toward a Geography of Trade Costs, mimeo, University of Chicago, 1999.
- 17.
Bacchetta, Philippe and Van Wincoop, Eric, 2002, “A Theory of Currency Denomination of International Trade”, ECB Working Paper, No. 177.
- 18.
Fukuda, S., Ono, M. On the Determinants of Exporters’ Currency Pricing: History vs. Expectations [R]. NBER Working Paper, No. 12432, August, 2006.
- 19.
PBOC, Report on RMB Internationalization 2015, 2015.
- 20.
The RMB/USD exchange rate adopted here is from the 2015 Statistical Data of the PBOC.
- 21.
Frankel, Jeffrey A., and Shang J. Wei. 2007. “Assessing China’s Exchange Rate Regime” NBER Working Paper, No. 13100. Frankel, Jeffrey A., and Shang J. Wei. 2008. “Estimation of de Facto Exchange Rate Regimes: Synthesis of the Technique for Inferring Flexibility and Basket Weights” NBER Working Paper, No. 14016.
- 22.
Frankel, Jeffrey A. 2009. “New Estimation of China’s Exchange Rate Regime” NBER Working Paper, No. 14700.
- 23.
Ma, G., and Robert N. McCauley. 2010. “The Evolving Renminbi Regime and Implications for Asian Currency Stability” BIS Working Paper, No. 321.
- 24.
Fang, Y., Shi C. Huang, and L. Niu. 2012. “De Facto Currency Baskets of China and East Asian Economies: The Rising Weights” BOFIT Discussion Paper, No. 2/2012.
- 25.
Fukuda, S. and M., Ono, On the Determinants of Exporters’ Currency Pricing: History vs. Expectations, NBER Working Paper, No. 12432, August, 2006.
- 26.
R. Zhao and C. Wu, The Role of Sub-financial Markets in the Development of the International Valuation Function of a Currency, Journal of Central University of Finance and Economics, 2016 (1): 50–60.
- 27.
The restriction on banks’ domestic currency business development overseas is a major factor hindering the yen’s internationalization.
Author information
Authors and Affiliations
Consortia
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
International Monetary Institute. (2018). Event of the Year: The RMB’s Inclusion into the SDR Basket. In: Monetary Institute, I. (eds) Currency Internationalization and Macro Financial Risk Control. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-0698-3_3
Download citation
DOI: https://doi.org/10.1007/978-981-13-0698-3_3
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-13-0697-6
Online ISBN: 978-981-13-0698-3
eBook Packages: Economics and FinanceEconomics and Finance (R0)