This paper discusses desirable exchange rate regimes and how countries can shift from their current regimes to these regimes over the medium term. We demonstrate the superiority of a basket-peg regime with the basket weight rule over a floating regime with the interest rate rule or the money...

This paper analyzes the optimal transition of the exchange rate regime in the People’s Republic of China (PRC). How the PRC can successfully reach the desired regime—whether a basket peg or floating regime—from the current dollar-peg regime remains a major question. To...

This paper discusses Japan’s strategy for Asian monetary integration. It argues that Japan faces three major policy challenges when promoting intraregional exchange rate stability. First, there must be some convergence of exchange rate regimes in East Asia, and the most realistic option is for...

For many observers, internationalization is the yuan’s manifest destiny—an irresistible by-product of the remarkable economic success of the People’s Republic of China (PRC). But is such confidence warranted? Recent history has seen the emergence of other currencies that...

The growing weight of the People’s Republic of China (PRC) in the world economy, measured by gross domestic product (GDP) and trade volume, has intensified debate on the potential international role of its currency—the renminbi (RMB). This paper provides an overview of RMB...

This paper reviews some of the current debates on the reform of the international monetary system. Despite its deficiencies, the United States (US) dollar will remain the dominant currency and Special Drawing Rights (SDR) cannot serve as either an international medium of exchange or a reserve...

In this paper we try to address the question of what could help make the renminbi a reserve currency. In recent years, the authorities in the People’s Republic of China (PRC) have made efforts to internationalize its currency through a two-track strategy : promotion of the use of the...

The squeeze in United States dollar liquidity that emerged with the global financial crisis highlighted the risks inherent in the current global financial system. Asia was adversely affected by the crisis not only because of its dependence on trade, but also because of its heavy reliance on the...

Despite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk,...

There are plans by five West African countries to establish a second monetary zone in the sub-region by December 2009. In this paper we ask whether a monetary union is the appropriate exchange rate regime for the sub-region based on economic criteria. We address the issue using a rigorous...