Abstract：This paper uses state space model and selects monthly data which range from August 2005 to June 2012 to examine the role of the RMB in exchange rate arrangements of 116 economies; and analyzes main factors that affect the exertion of RMB’s anchor currency function based on the estimated time variation index which measures RMB’s currency anchor effect. The result shows that the RMB has been the main reference currency of 21 economies; the influence of the RMB has exceed the pounds and been equivalent with yen in the 116 economies which are measured. Among all factors which impact RMB’s anchor currency function, trade integration effect is the dominant force. Relative trade competitiveness and development discrepancy of domestic financial departments play significant roles in prompting RMB’s impact. The greater difference of trade terms’ shock, the less conducive to the enhancement of the impact of RMB. In response to this conclusion, this paper presents some strategies and measures to effectively promote further exertion of RMB’s anchor currency function.
Keywords: Anchor Currency, State Space Model, Time-varying Parameters
source:Finance & Trade Economics ,No.4,2013