Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67520
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper No. 3989
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper studies the impact of a broadening of the SDR basket to the Chinese currency on the composition and volatility of the basket. Although, in the past, RMB inclusion would have had negligible impact due to its limited weight, a much more significant impact can be expected in the next decades, and more so if the Chinese currency is pegged to the US dollar. If the objective is to reinforce the attractiveness of the SDR as a unit of account and a store of value through more stability, then a broadening of the SDR to the RMB could be appropriate, provided some flexibility is introduced in the Chinese exchange-rate regime. This issue of flexibility is de facto more important than that of 'free usability' to make the SDR more stable, at least in the short and medium run.
Subjects: 
SDR
renminbi
international monetary system
foreign exchange volatility
JEL: 
F31
F33
Document Type: 
Working Paper
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