GRIPS 政策研究センター Policy Research Center


Apr 1, 2016 - Mar 31, 2018

A study of the first users of a newly-emerging international currency


The remarkable progress in internationalization of the Chinese renminbi (RMB) since the 2008 global financial crisis, along with mounting skepticism about the dollar, have given rise to a new wave in the study of currency internationalization and attracted a large number of political economists in addition to the economists who have traditionally dominated analysis of this topic. A majority of this new research places its analytic focus on the issue of whether the dollar will maintain its status as the dominant international currency, or if the RMB will instead replace it or substantially challenge its standing.


Despite the recent abundance of research on currency internationalization, most studies have however been largely silent on the key related issue of who the first users of a newly-emerging international currency are. The internationalization of any currency tends to proceed unevenly across countries, however. In the beginning stages the convenience of such a currency’s use is in fact unlikely to be high, and its overall economic attractiveness will tend to trail that of the incumbent key international currency, which enjoys well-established transaction networks. It is thus in general costly to be the first to use a newly-internationalizing currency. Nonetheless, certain foreign actors do begin to use a newly-internationalizing currency earlier than others who take wait-and-see approaches. And the internationalization of that currency is thus initiated by these particular first users of it.    


The issue of who are the first users of a newly-internationalizing currency is therefore a crucial one for the understanding of currency internationalization, addressing the dynamics of emergence of a new international monetary order. And our study analyzes this salient question from a variety of perspectives.


The analytic focus of our research on the users of international currencies leads it to employ a demand-side analysis, in contrast to the majority of currency internationalization studies which tend to adopt supply-side approaches concentrating on the economic and/or political conditions of the states issuing international currencies.