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International Currency Competition

What cashback forex International Currency Competition The clear def forexdiscountbrokersition of forexrebatesbrokers forexbonusrebate competition refers to the process of deciding to what extent the currencies of different countries are used by non-residents International currency competition is essentially the choice of different currencies by economic agents based on economic rationality, forex discount brokers is a demand-driven, Darwinian struggle The Determinants of International Trade Currency Competition Much of the theoretical research on international currency competition revolves around Before and after the introduction of the euro, the issue of international currency competition has attracted widespread attention from scholars, and theories have been enriched, with research perspectives moving toward a combination of macro and micro (a) Comprehensive strength says that the comprehensive strength of a country, including economic, trade, financial, political and military power, supports the international status of a countrys currency  1. economic and trade economic scale, economic strength and openness to the outside world directly affect the international use of currency (Phi1ippHartmannandOtmarIssing, 2002) the currency of large-scale economies usually have a large volume of foreign exchange transactions, which can effectively reduce transaction costs and form economies of scale (Ewe- GheeLim, 2006) Rey (1999) argues that the size of trade is more decisive for the internationalization of a countrys currency than the size of the economy Although as early as 1870, the size of the U.S. economy had surpassed that of the United Kingdom, it was not until after World War II, when U.S. exports significantly exceeded those of the United Kingdom, that the U.S. dollar gradually replaced the British pound as the key international currency ( RainerBeckmann et al. 2001) 2. Financial markets and financial systemThe depth, breadth and openness of financial markets directly affect the international monetary status (TavlasandOzeki, 1992) The breadth of the market is reflected in the large number of financial instruments traded; the depth is reflected in the developed securities market; the openness is reflected in the relaxation of trade restrictions and capital controls (George S. Tavlas, 1997) The degree of financial market development is closely related to the international monetary status of the 19th and early 20th centuries, when the British pound was the leading international currency, London was the worlds preeminent financial market. -GabrieleGalati and Phil1ipWooldridge (2006) of GheeLim (2006) selected data on foreign holdings of U.S. bonds, government bond market, repo market, non-government bond market, foreign currency assets and emerging market liabilities, and applied mean- - ANOVA, a comparative analysis of the competitive determinants of the U.S. dollar and the euro The birth of the euro has increased the liquidity and breadth of the euro financial market, but has not caused substantial changes This is because the U.S. dollar is superior in terms of financial market size, credit quality, liquidity, and the historical inertia of international currencies 3. Political status The political status of the currency issuing country In the process of European monetary integration, European monetary unification is certainly an economic act, but it is not difficult to examine the development process of monetary union plans to find that monetary integration contains a deep political motivation behind the monetary In the process of European monetary integration, the unified currency in Europe is certainly an economic act, but if we look at the process of monetary union plan, we can see that there are deep political motives behind monetary integration. In settlement Grassman (1973), Carse (1980) and other long-term empirical studies found that: in developed and developing countries trade, generally use the currency of developed countries to settle; in developed countries trade, currency selection is related to the variety of trade MatteoBobba, GiuseppeDellaCorte and AndrewPowell (2007) use two-stage least squares (2SLS) and generalized method of moments (GMM) to study the factors influencing competition in international currency denomination units in 105 countries, 64 developing countries, and 41 developed countries, respectively, in a categorical manner There is a stable relationship between international currency choice and economic entities and financial variables, and this relationship manifests differently in developed and developing countries Euro establishment raises The establishment of the euro has increased liquidity and network externalities and posed a strong challenge to the U.S. dollar 2. Ease of transactions and currency stability Ease of transactions is reflected in the network externalities formed by the transaction network supported by the economy, trade and finance, and also in the ease of capital flows corresponding to the relaxation of capital controls After World War II, due to the relaxation of capital controls in the U.S. financial markets, the U.S. dollar became an attractive reserve asset for foreign official institutions and a The stability of the currency is reflected in the political stability of the issuing country and the stability of the value of the currency (George Tavlasand YuzuruOzeki, 1992) "When a country collapses, the currency dissipates like smoke" (Mundell, 1998). Mundell, 1998) Currency value stability includes external value stability (exchange rate) and internal value stability (inflation rate) (George S. Tavlas, 1997) The phenomenon of "bad money driving out good money" often occurs in the market, the so-called "Greshins law" (Greshin, 1997). Greshams Law" (GreshamSLaw) and international monetary competition, to a large extent, follows the "inverse Greshams Law" of the survival of the fittest. In his study of international monetary history, Mundell pointed out that "over thousands of years of history, strong currencies have always expelled weak currencies from international competition and gained a dominant position" 3. Kind1eberger (1981) and Krugman (1984) have explored the rise and fall of international currencies from the perspective of the history of economic development Heller and Knight (1978) use cross-sectional data for 76 countries in 1975 to analyze the relationship between official foreign exchange reserve currencies and a countrys export and trade shares, macroeconomic stability, financial markets, network The relationship between externalities Dooley, Lizondo, and Mathieson (1989) find that official foreign exchange reserve choice depends mainly on peg currency choice, trade structure, external debt, and foreign capital structure MenzieChinn and JeffreyFrankel (2007) econometrically analyze the international reserves of central banks between 1973 and 1998 The significant variables that determine the structure of the major currencies of the international reserves of central banks are: economic aggregates, inflation rate, variance of exchange rate fluctuations, and the size of financial centers (iii) Geopolitical theory 1. The role of politics and geography National privileges have an important impact on the status of a countrys currency in the international arena Even if the economy gradually loses its privileges, historical traditions will continue to play an important role After the First World War, the combined power of the United Kingdom Decline, but the British pound still maintains a high international currency status, which is not unrelated to the massive use of its colonial countries in the settlement of international trade, currency use habits also have a close relationship with the countrys status economic and political status of the country, its currency tends to be more frequently used in international trade In addition, the colonies, war, alliances, and even joint initiatives and other factors will promote the currency competitiveness 2. Geography and monetary spheres of influence Cohen (1996) introduced the concept of monetary geography: the spatial organization of monetary relations - how monetary regions are formed and regulated. He describes the asymmetry of competition between currencies and the different authority relationships as a "monetary pyramid" and divides international currencies into seven classes: top currencies, noble currencies, outstanding currencies, ordinary currencies, permeated currencies, quasi-currencies, pseudo-currencies International monetary competition will be a process of continuous redistribution of spheres of influence among countries 3. Willingness to internationalize currencies brings benefits to the currency issuing countries, but also has an impact on a countrys economy and finance and affects monetary policy Based on this concern, governments have taken restrictive measures against currency internationalization Forty to fifty years after World War II, countries other than the United States (Germany, Japan, France) discouraged the internationalization of their currencies, carried out capital account controls and strict financial controls (iv) Scale effect theory 1. Network externality currency status depends on the current use of the currency (Kiyotaki, MatsuyamaandMatsuo, 1993: Krugman, 1984 Cohen, 2000; Rey, 2001) The wider and more frequent the current use of currency, the lower the transaction costs and the more competitive it is (Gaspar, 2004) People use international currency and use language similarly and there is mutual imitation behavior (KevinDowdandDavidGreenaway, 1993) Philipp Hartmann (1998) uses a combination of game theory and time-series panel data analysis at the micro level of the foreign exchange market to verify that there are indeed network externalities in international currency competition Lim, Ewe-Ghee (2006) uses foreign exchange trading data from 1999 to 2005 to verify that "In addition, financial innovation will continue to reduce currency switching costs, and people will be less willing to concentrate on one international reserve currency in order to reduce switching costs. Currency segmentation markets 2. Switching costs and historical inertia International currency substitution has various switching costs, in addition to transaction and learning costs, and uncertainty based on network externalities created If others do not switch to the new currency, network externalities cannot be created and more costs are paid for using the new currency KevinDowd and David Greenaway (1993 ) explain why people tend to be reluctant to switch currencies by constructing a model in which the cost of switching international currencies, even though the most currently used international currency is already significantly inferior to other currencies, leads to international currency status inertia (GabrieleGalatiandPhi1ipWooldridge, 2006) Network externalities exacerbate this inertia The phenomenon of "gradual and abrupt change" and persistence effects Paul Krugman (1980) developed a 3-country, 3-currency model and used partial equilibrium analysis to discuss the formation process of international intermediated currencies and the phenomenon of capitulation in international intermediated currency switching The loss of a currencys status as an international intermediary currency is preceded by a process of accumulation, and after this "gradual" process reaches a critical point, it results in a "sudden change" in the international exchange structure. MarcFlandreau and ClemensJobst (2009) use data from the late nineteenth century to empirically analyze the persistence of international monetary choices, but the evolution of the international monetary system is not solely influenced by path dependence; size plays a significant role in the long run. In the long run, the size of the economy and trade is the decisive force that leads a countrys currency to the leading currency status, so even without the First World War, the US dollar would have inevitably replaced the British pound.
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