IMPACT OF EXCHANGE RATE AND MONETARY POLICY TOWARD RMB INTERNATIONALIZATION

Abstract

The main purpose of this paper is to investigate the effects of RMB exchange rate and monetary policy on the RMB internationalization through quantitative analysis. Because in 2009 China began to promote the internationalization of the RMB, it focused on an analysis of the development of RMB internationalization between 2009 and 2016. This study employs a main research question: What are the main factors affecting the internationalization of the RMB? Moreover, this study will establish the impact of four independent variables on the internationalization of the RMB: exchange rates, exchange rate expectations, money supply, interest rates. The use of RMB overseas deposits as a measure of the RMB internationalization. The research method is to use multiple linear regression in SPSS for analysis. The results of the study show that exchange rates and money supply have a significant impact on the internationalization of the RMB. This means that the exchange rate has a negative impact on the RMB internationalization, and the money supply has a positive impact on the RMB internationalization. This result is also in line with Mundellian Trilemma. In an open economy, it can only satisfy the monetary policy and exchange rate. This article recommend proposes to further analyse the impact of exchange rates and money supply on the RMB internationalization.