The international influence of RMB joining the SDR: a measurement based on scenario analysis

SU Zhi1,2 HU Di1 FANG Tong1

(1.School of Statistics and Mathematics of Central University of Finance and Economics, Beijing, China 100081)
(2.International Monetary Institute, Renmin University of China, Beijing, China 100872)

【Abstract】The year 2015 is the important window period of RMB joining the SDR basket, and whether RMB can join the IMF's SDR has drawn attention from all walks of life. If RMB is included in the SDR, what changes will take place in the SDR and will SDR debtor members be impacted? Existing research lacks the in-depth study of these questions. This paper studies the impact of RMB joining the SDR by using a scenario analysis model. Main conclusions are as follows: the impact on the value of SDR in USD will be small if RMB joins the SDR basket as soon as possible; a more flexible exchange rate regime can weaken the impact of the inclusion of RMB to the SDR basket; the inclusion of RMB would not produce a shock on both the short-term and the long-term equilibrium value of the SDR basket; the impact on the SDR interest rate by the inclusion of RMB to the SDR basket is limited. RMB joining the SDR would not increase the burden of debtor members obviously.

【Keywords】 special drawing rights (SDR); scenario analysis; international monetary system;

【DOI】

【Funds】 The General Project of National Natural Science Foundation of China (71473279); the Youth Project of National Natural Science Foundation of China (71101157). Program for New Century Excellent Talents in University(NCET-13-1055)

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    Footnote

    [1]. ① Scenario analysis is a process of analyzing possible future events through consideration of all possible results. [^Back]

    [2]. ① Due to the length limitation of the paper, the procedure of variable prediction is omitted. You can contact the author if you are interested in it. [^Back]

    [3]. ① During 2001 to 2010, we assume that the amount of the RMB as an official foreign exchange reserve is zero. [^Back]

    [4]. ① As for the question of whether to choose a fixed effect model or a random effect model when constructing a model, this paper believes that the traditional Hausman test results cannot be taken as the sufficient condition for choosing a fixed effect model or a random effect model, because no matter what the actual problem is, choosing a fixed effect model is always less likely to make mistakes compared with choosing a random effect model. the Hausman test results have also proved this conclusion, and a majority of panel data would choose a fixed effect model after the Hausman test. Therefore, based on the actual problem of the real effective exchange rate and the sample data of 128 countries, this paper preliminarily believes that a random effect model is appropriate for the selected variables and samples, and conducts the Breusch and Pagan Lagrange multiplier test to the panel data obtained. The statistics of the Breusch and Pagan Lagrange multiplier test is 15,299.93 with a corresponding P value of 0.0000, showing that the random effect model performs well. [^Back]

    [5]. ① This is because that during 2003 to 2009, the short-term interest rate in China is very close to the weighted average of the four currencies in the SDR. [^Back]

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This Article

ISSN:1006-480X

CN: 11-3536/F

Vol , No. 12, Pages 5-19

December 2015

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Article Outline

Abstract

  • 1 Introduction
  • 2 The influence of RMB inclusion in the SDR
  • 3 The empirical test
  • 4 Conclusion and suggestion
  • Footnote

    References