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Chinese Currency Report
Essay Instructions:
3. How is your currency financing international trade? ( Cohen Chapter 4 and Eichengreen at al. chatper 5)
a. Please find and plot a graph representing/showing the evolution of the trade balance of your country for the past 15 years (At least). I believe it would be better to also add a graph representing the evolution of your national currency. make sure years on both graphs correlates. I would suggest you have Exports and imports separate to hep you better answer parts b and c below. A graph showing the evolution of the trade balance is optional but recommended.
b. once you have your graph, explain any relationship between the value/price of your currency and the evolution of imports and exportss of your country. Make sure your incorporate reference to your reseach and findings. This analysis must include reference to the currency war or currency conflict, how this affected the country, etc.
c. In your opinion, do you beleive that the trade balance is/has been affected by the value/price of the national currency?
Essay Sample Content Preview:
Chinese Currency Report
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Chinese Currency Report
Internationalizing the Chinese currency enables international trade and financial service, significantly influencing economic growth. Banks and other foreign exchange market participants trade more than $285 billion worth of the Renminbi daily, commanding power among other competing currencies. A constant increase in Chinese trade in goods indicates the currency's global economic significance, hence becoming the world's largest single trader (Alessandria et al. 2017). International currencies' significant roles in financing international functions are indicated by analyzing financial markets, trade, and central bank reserves. Since the early day, the power of money in international trade depends on who has commodities needed more, thus a great manifestation of relational asymmetries.
The internationalization of currencies is a market characteristic that reflects players' preferences in global trade (Cohen 2018). Financial markets offer a platform for trading where different currencies pair. The Renminbi practical monetary autonomy facilitates added advantage through enabling smooth delays to adjustment costs. However, limits and ancillary conditions influence the centrality nature of the global financial network. Chinese currency plays an essential role in facilitating imports and exports through regulating the central bank reserves. Time is a crucial component in influencing the value-added through internationalization when foreign liabilities accumulate. Renminbi being a vehicle currency, entails regular transactions with peripheral currencies, thus an advantage of network externalities. Local business benefits from reduced transaction costs, whereas financial institutions benefit from transaction volume in home currency.
The Chinese currency also plays a vital role in trade invoicing and settlements (Cohen 2018). International trade necessitates involved parties to agree on the monetary unit to label contracts and effectuate payments. Although most of the world's exports use the US dollars for invoicing and settling trades, the Renminbi has a good percentage of the share. An extensive transaction network offers economic benefits through trading commodities such as most notably, oil and gold. The Chinese government uses the home currency to finance external deficits, thus enhancing autonomy. The state also benefits by mitigating the traditional balance of payment constraints and easily deflecting the adjustment cost (Cohen 2018). The dependence of the Chinese currency is notable through increased investment, thus reinforcing the global financial network.
The Renminbi is an instrument of leverage in global international finance, enhancing borrowing capacity beyond the budget limits. The ancillary factors that inhibit the Chinese currency's influence are the availability of alternative currency options and the currency's existing foreign holdings (Cohen 2018). Determining the monopolistic power of the money entails the ability to control a large supply of investment opportunities. As a result, the market-shaping market sentiments about attractive investment opportunities affect demand. The creditor's international trade role is to facilitate a platform where foreign countries trading can extend credit in the issuing country.
The Chinese currency also plays the role of a reserve currency in facilitating international operations. Reserve currency serves as an intervention tool; therefore, it is a store of value (Cohen 2018). Central banks hold reserves in the form of liquid assets denominated in local currency. An appropriate reserve currency's economic benefits are increasing profit opportunities for local financial institutions willing to help the central bank manage the reserves and gain competitive dominance in the economy. A high financial reserve holding implies extended credit to the issuing country, making it easy to delay adjustment costs. Other geopolitical factors that influence international currency trade include state diplomatic and security relations with respective reserve holders.
Chinas balance of trade involves the analysis of the imports and exports commercial value over a specified period (Alessandria et al. 2017). Identifying the difference between the number of exports and the cost of imports helps compare the country's economy with other competing economies. The customs office formulates a trade balance with a crucial component of the current account, including income earned on other international payments. Many countries strive to achieve a surplus balance of payment, although investment in economic developments such as infrastructure and health facilities is beneficial in trade deficit countries. Favorable trade balances imply selling more products, which equally translates to an improvement of living standards and competitive advantage for domestic companies, for example, the Toyota Company. A m...
Name:
Institution:
Course:
Instructor:
Date:
Chinese Currency Report
Internationalizing the Chinese currency enables international trade and financial service, significantly influencing economic growth. Banks and other foreign exchange market participants trade more than $285 billion worth of the Renminbi daily, commanding power among other competing currencies. A constant increase in Chinese trade in goods indicates the currency's global economic significance, hence becoming the world's largest single trader (Alessandria et al. 2017). International currencies' significant roles in financing international functions are indicated by analyzing financial markets, trade, and central bank reserves. Since the early day, the power of money in international trade depends on who has commodities needed more, thus a great manifestation of relational asymmetries.
The internationalization of currencies is a market characteristic that reflects players' preferences in global trade (Cohen 2018). Financial markets offer a platform for trading where different currencies pair. The Renminbi practical monetary autonomy facilitates added advantage through enabling smooth delays to adjustment costs. However, limits and ancillary conditions influence the centrality nature of the global financial network. Chinese currency plays an essential role in facilitating imports and exports through regulating the central bank reserves. Time is a crucial component in influencing the value-added through internationalization when foreign liabilities accumulate. Renminbi being a vehicle currency, entails regular transactions with peripheral currencies, thus an advantage of network externalities. Local business benefits from reduced transaction costs, whereas financial institutions benefit from transaction volume in home currency.
The Chinese currency also plays a vital role in trade invoicing and settlements (Cohen 2018). International trade necessitates involved parties to agree on the monetary unit to label contracts and effectuate payments. Although most of the world's exports use the US dollars for invoicing and settling trades, the Renminbi has a good percentage of the share. An extensive transaction network offers economic benefits through trading commodities such as most notably, oil and gold. The Chinese government uses the home currency to finance external deficits, thus enhancing autonomy. The state also benefits by mitigating the traditional balance of payment constraints and easily deflecting the adjustment cost (Cohen 2018). The dependence of the Chinese currency is notable through increased investment, thus reinforcing the global financial network.
The Renminbi is an instrument of leverage in global international finance, enhancing borrowing capacity beyond the budget limits. The ancillary factors that inhibit the Chinese currency's influence are the availability of alternative currency options and the currency's existing foreign holdings (Cohen 2018). Determining the monopolistic power of the money entails the ability to control a large supply of investment opportunities. As a result, the market-shaping market sentiments about attractive investment opportunities affect demand. The creditor's international trade role is to facilitate a platform where foreign countries trading can extend credit in the issuing country.
The Chinese currency also plays the role of a reserve currency in facilitating international operations. Reserve currency serves as an intervention tool; therefore, it is a store of value (Cohen 2018). Central banks hold reserves in the form of liquid assets denominated in local currency. An appropriate reserve currency's economic benefits are increasing profit opportunities for local financial institutions willing to help the central bank manage the reserves and gain competitive dominance in the economy. A high financial reserve holding implies extended credit to the issuing country, making it easy to delay adjustment costs. Other geopolitical factors that influence international currency trade include state diplomatic and security relations with respective reserve holders.
Chinas balance of trade involves the analysis of the imports and exports commercial value over a specified period (Alessandria et al. 2017). Identifying the difference between the number of exports and the cost of imports helps compare the country's economy with other competing economies. The customs office formulates a trade balance with a crucial component of the current account, including income earned on other international payments. Many countries strive to achieve a surplus balance of payment, although investment in economic developments such as infrastructure and health facilities is beneficial in trade deficit countries. Favorable trade balances imply selling more products, which equally translates to an improvement of living standards and competitive advantage for domestic companies, for example, the Toyota Company. A m...
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