Skip to main content
SpringerLink
Log in

Impact of the RMB Joining in the SDR Basket on Its Internationalization from the Perspective of Risk Spillover

  • Published:
Journal of Systems Science and Complexity Aims and scope Submit manuscript

Abstract

For evaluating the influence of the Chinese renminbi (RMB) joining in the special drawing right (SDR) basket on RMB’s internationalization, the authors systemically study the risk spillover networks and examine the dynamic relationship of exchange rates among the SDR currencies including the US dollar (USD), European Union euro (EUR), Japanese yen (JPY) and British pound (GBP). The empirical results demonstrate that the USD takes a dominant position and holds the biggest risk spillover to other currencies, and the RMB’s inclusion to the SDR basket makes the risk spillover to get average, giving rise to the SDR currency system more stable to a certain degree. The inclusion of the RMB in the SDR not only can reduce the systematic risk of the SDR, but also has a certain impact on the international exchange rate markets. Nowadays, in front of the growing trade friction, more such researches could help to effectively deal with the currency disputes.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

References

  1. Peter H and Steven W K, The effect of exchange rate uncertainty on the prices and volume of international trade, Journal of International Economics, 1978, 8(4): 483–511.

    Article  Google Scholar 

  2. Abdur R C, Does exchange rate volatility depress trade flows? Evidence from error-correction models, The Review of Economics and Statistics, 1993, 75(4): 700–706.

    Article  Google Scholar 

  3. Enrique G M, The terms of trade, the real exchange rate, and economic fluctuations, International Economic Review, 1995, 36(1): 101–137.

    Article  Google Scholar 

  4. Eden H V, Bin L, Romyn G, et al, Natrex and determination of real exchange rate of RMB, Journal of Systems Science and Complexity, 2001, 14(4): 356–372.

    MATH  Google Scholar 

  5. Sun X, Li J, Tang L, et al., Identifying the risk-return tradeoff and exploring the dynamic risk exposure of country portfolio of the FSU’s oil economies, Economic Modelling, 2012, 29(6): 2494–2503.

    Article  Google Scholar 

  6. Jose M C and Linda S G, Exchange rate pass-through into import prices, Review of Economics and Statistics, 2005, 87(4): 679–690.

    Article  Google Scholar 

  7. Silvana T, On the trade impact of nominal exchange rate volatility, Journal of Development Economics, 2007, 82(2): 485–508.

    Article  Google Scholar 

  8. Mohsen B O and Scott W H, Exchange rate volatility and trade flows: A review article, Journal of Economic Studies, 2007, 34(3): 211–255.

    Article  Google Scholar 

  9. Jordi G and Tommaso M, Monetary policy and exchange rate volatility in a small open economy, The Review of Economic Studies, 2005, 72(3): 707–734.

    Article  MathSciNet  Google Scholar 

  10. Joshua A and Daniel R C, Real exchange rate and international reserves in an era of growing financial and trade integration, The Review of Economics and Statistics, 2008, 90(4): 812–815.

    Article  Google Scholar 

  11. Gust C J, Leduc S, and Vigfusson R J, Trade integration, competition, and the decline in exchange-rate pass-through, Journal of Monetary Economics, 2010, 57(3): 309–324.

    Article  Google Scholar 

  12. Zhang Z, Makin A J, and Bai Q, Yen internationalization and Japan’s international reserves, Economic Modelling, 2016, 52: 452–466.

    Article  Google Scholar 

  13. Du J and Lai K K, Copula-based risk management models for multivariable RMB exchange rate in the process of RMB internationalization, Journal of Systems Science and Complexity, 2017, 30(3): 660–679.

    Article  MathSciNet  Google Scholar 

  14. Galagedera D U A and Kitamura Y, Effect of exchange rate return on volatility spill-over across trading regions, Japan & the World Economy, 2012, 24(4): 254–265.

    Article  Google Scholar 

  15. Drehmann M and Tarashev N, Systemic importance: Some simple indicators, Bis Quarterly Review, 2011.

  16. Upper C, Simulation methods to assess the danger of contagion in interbank markets, Journal of Financial Stability, 2011, 7(3): 111–125.

    Article  Google Scholar 

  17. Lee S H, Systemic liquidity shortages and interbank network structures, Journal of Financial Stability, 2013, 9(1): 1–12.

    Article  Google Scholar 

  18. Greenwood R, Landier A, and Thesmar D, Vulnerable banks, Journal of Financial Economics, 2015, 115(3): 471–485.

    Article  Google Scholar 

  19. Meng Z, Jiang M, and Hu Q, Dynamic CVaR with multi-period risk problems, Journal of Systems Science and Complexity, 2011, 24(5): 907–918.

    Article  MathSciNet  Google Scholar 

  20. Nier E, Yang J, Yorulmazer T, et al, Network models and financial stability, Social Science Electronic Publishing, 2007, 31(6): 2033–2060.

    MATH  Google Scholar 

  21. Gai P and Kapadia S, Contagion in financial networks, Proceedings Mathematical Physical & Engineering Sciences, 2010, 466(2120): 2401–2423.

    MathSciNet  MATH  Google Scholar 

  22. Pesaran B and Pesaran M H, Conditional volatility and correlations of weekly returns and the VaR analysis of 2008 stock market crash, Economic Modelling, 2010, 27(6): 1398–1416.

    Article  Google Scholar 

  23. Diebold F X and Yilmaz K, Better to give than to receive: Predictive directional measurement of volatility spillovers, International Journal of Forecasting, 2012, 28(1): 57–66.

    Article  Google Scholar 

  24. Diebold F X and Yilmaz K, On the network topology of variance decompositions: Measuring the connectedness of financial firms, Journal of Econometrics, 2011, 182(1): 119–134.

    Article  MathSciNet  Google Scholar 

  25. Yang Z and Zhou Y, Quantitative easing and volatility spillovers across countries and asset classes, Management Science, 2017, 63(2): 333–354.

    Article  Google Scholar 

  26. Fan X, Fang Y, and Wang D, Systemic risk and systemically important financial institutions of China’s bank section-an analysis based on CCA and DAG, Journal of Financial Research, 2013, 11: 82–95.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Economics and Management, Beihang University, Beijing, 100191, China

    Bingjie Zhang

  2. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China

    Shouyang Wang & Yunjie Wei

  3. Center for Forecasting Science, Chinese Academy of Sciences, Beijing, 100190, China

    Yunjie Wei

  4. Risk Management Department, Postal Savings Bank of China Beijing Branch, Beijing, 100068, China

    Xueting Zhao

Authors
  1. Bingjie Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Shouyang Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Yunjie Wei
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Xueting Zhao
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yunjie Wei.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71801213 and 71642006.

This paper was recommended for publication by Editor YANG Cuihong.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Zhang, B., Wang, S., Wei, Y. et al. Impact of the RMB Joining in the SDR Basket on Its Internationalization from the Perspective of Risk Spillover. J Syst Sci Complex 34, 339–350 (2021). https://doi.org/10.1007/s11424-020-9215-8

Download citation

  • Received:

  • Revised:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11424-020-9215-8

Keywords

Search

Navigation