Probably about a quarter of the world’s foreign exchange reserves are denominated in euros and the euro appears to have gained importance as a reserve currency in recent years.

The dollar is the world’s pre-eminent anchor currency; the euro is a regionally important anchor currency.

The euro has made limited progress as a vehicle currency; the dollar 
remains dominant.

The dollar is the most important currency for invoicing, but the euro is now used in some transactions in some new EU member countries.

The euro is likely to remain important as a reserve currency, but is 
unlikely to usurp the dollar’s role as an anchor currency, a vehicle currency or as a unit of account in the foreseeable future.

The international role of the Euro

The Political Handbook of the World provides an alphabetically arranged ready reference to national governments of the world from A (Afghanistan) to Z (Zimbabwe). Each entry contains the official t...

Political Handbook of the World

Japan's Financial Crisis: Institutional Rigidity and Reluctant Change. By Jennifer A. Amyx. Princeton and Oxford: Princeton University Press, 2004. 408p. $39.50. Recently, the puzzle of the unexpected and never-ending Japanese financial crisis has eluded Japan specialists and comparative political economists alike. How could the same institutions generate an overperforming economy for more than three decades and a decade-long crisis? How could a system once praised for its ability to handle economic shocks such as the two oil shocks and a massive reevaluation of the Yen suddenly stall and prove unable to adapt to changing conditions? How could the greatest creditor and capital exporter of the planet have such weak financial regulations? Scholars have disagreed on both the diagnostics and the causes of the crisis. While some have focused on mistakes in fiscal or monetary policy, others have emphasized a systemic breakdown. While some have emphasized domestic political factors (be they interest groups, party politics, electoral system, or bureaucratic dominance), others have focused on external factors.

Japan's Financial Crisis: Institutional Rigidity and Reluctant Change

https://www.swiftinstitute.org/wp-content/uploads/2013/09/SWIFT-Institute-Working-paper-No-2012-001-The-Internationalisation-of-the-RMB-Batten-and-Szilagyi_V4b-FINAL.pdf

The internationalisation of the RMB: New starts, jumps and tipping points

We investigate the process of currency internationalisation by determining the pace of internationalisation of the Chinese Renminbi (RMB). In contrast to other published work that relies upon international banking, trade and currency statistics, we utilise aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT). This data allows better measurement of the role played by a currency in international trade and capital account settlement.RMB transactions in these areas have expanded significantly in recent years, although they remain concentrated in the financial centres of Hong Kong, Macau, Singapore and Taipei, where language and culture offer clear advantages. Recent RMB cross-border activity in London and New York shows that there is the potential to shift activity beyond the Asia-Pacific region, although the limited scope of RMB transactions highlights the underdevelopment of China’s domestic financial markets and the limited nature of cross-border transactions outside trade settlement and foreign exchange trading.Our analysis shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation. However, on-balance China’s path to RMB internationalisation remains slow and runs the risk of failing to fully capitalise upon the opportunities that are now unfolding as the international economic and political landscape shifts more towards its favour.

The Internationalisation of the RMB: New Starts, Jumps and Tipping Points

We analyze the factors that increase the likelihood that other nations will follow China's global economic leadership. While our theoretical framework incorporates the conventional argument that China pulls in followers with economic benefits, we focus on grievances with the current global order that have the effect of pushing countries toward the rising new leader. We find that grievances about global financial instability are particularly important push factors. Our results show that countries that have experienced more financial crises, more variable capital account policies, more volatile portfolio capital outflows, and more social unrest during IMF programs are more likely to support China's global leadership than leaders of nations that have been less exposed to these problems. We find no evidence that grievances about global governance, or grievances about discriminatory US trade policies, are related to foreign support for China's global economic leadership. Overall, our evidence is consistent with the interpretation that leaders want to reform and preserve the WTO and the IMF, which have worked reasonably well for them under US leadership. At the same time, they have incentives to follow China's economic leadership on global capital flows, emphasizing long-term infrastructure and development finance over short-term flows which, under the current order, have imposed large costs on many economies.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/C1157FD7E2C952D8F9E0342F5FC352E5/S0020818320000120a.pdf/div-class-title-explaining-foreign-support-for-china-s-global-economic-leadership-div.pdf

Explaining Foreign Support for China's Global Economic Leadership

The relationship between major East Asian economies' international reserves and internationalization of their currencies presents a seeming paradox in international finance. While large international reserves may be expected to foster more widespread global use of a currency, strong growth of international reserves has been associated with very low Asian currency internationalization. Using the generalized method of moments (GMM) estimator we show the overall size of the Bank of Japan's international reserves, as well as the ratio of its foreign exchange reserves to international reserves, are negatively related to yen internationalization, while gold reserves and special drawing rights are positively related.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2703358_code1538998.pdf?abstractid=2703358&mirid=2

Yen Internationalization and Japan's International Reserves

Yen internationalization and Japan's international reserves

This paper produces the first cross-country evidence on the relationship between the size of foreign exchange reserves and local currency internationalization using a sample of Switzerland, Japan and the UK. It finds that a high ratio of foreign exchange reserves to international reserves has a significant, but negative, impact on local currency internationalization during the period 1976–2009. After controlling for interest rate differential, different indicators for long-run depreciation and volatility of exchange rates, as well as the once-in-a-century global financial crisis of 2007–2009, the above conclusion still holds. Additionally, these results are robust to different methods (Pooled OLS and Pooled IV/2SLS) and measures of the scale of foreign exchange reserves. This study is informative for any policy decisions and will provide a strategic reference for the Chinese government as it optimizes the composition of its international reserves, promotes the process of renminbi (RMB) internationalization and becomes a major power through financial development.

The Size of Foreign Exchange Reserves and Local Currency Internationalization: Cross-Country Evidence

内容提要: 本文采用GMM 估计方法，根据影响日元国际化的长期决定因素( 经济实力、金融市场发展、货币汇率升值、通货膨胀和货币惯性) 设定回归基准模型，对1976—2009 年间日本的外汇储备规模与日元国际化程度之间的关系进行了实证研究。文章发现: 日本国际储备中畸高的外汇储备占比对日元国际化具有显著的负面影响。在控制了日元汇率波动性、“百年一遇”国际金融危机的冲击以及日本超低利率的不利影响后，以上结论仍然成立。本文对日元国际化程度较低的现象给出了一种全新的解释，对于人民币国际化问题有借鉴作用。 This paper employs the GMM estimator to investigate the empirical relationship between the size of Japanese foreign exchange reserve and the degree of Yen internationalization from 1976 through 2009 by specifying the regression benchmark based on the long-run determinants of Yen internationalization with economic power, financial market development, Yen appreciation, inflation and currency inertia. This paper finds that the extremely high ratio of foreign exchange reserve to international reserves in Japan has a statistically significant but negative effect on Yen internationalization. After controlling for the effects of the Yen’s exchange rate volatility and the once-in-100-year international financial crisis as well as Japan’s lower interest rate, the conclusion still holds. This study provides a new interpretation to the lower degree of Yen internationalization.

Zhiwen Zhang

Papers

Explaining Foreign Support for China's Global Economic Leadership

Yen Internationalization and Japan's International Reserves

Yen internationalization and Japan's international reserves

The Size of Foreign Exchange Reserves and Local Currency Internationalization: Cross-Country Evidence

The Size of Foreign Exchange Reserve and Local Currency Internationalization: An Empirical Study on the Japanese Yen