CEU Electronic Theses and Dissertations, 2024
| Author | Sager, Mikkel |
|---|---|
| Title | A New Framework for Currency Internationalization: Identifying Strategies for the EU and China to Challenge the USD Hegemony |
| Summary | This thesis investigates the potential of the Euro (EUR) and Chinese Renminbi (RMB) to challenge the hegemony of the US Dollar (USD) in the global monetary system by analyzing the interplay of political, economic, and military factors on the degree of internationalization of the currencies. Utilizing a Linear Multiple Regression Model (LMRM), the study quantitatively assesses the influence of these factors—collectively termed the Factor Trinity—on the internationalization of currencies (CI). Empirical data from 2002 to 2021 is employed to measure CI through foreign exchange reserves, foreign exchange turnover, and cross-border banking claims and liabilities, representing the three functions of money. The findings reveal that while both the EU and China possess distinct opportunities to enhance their CI, significant domestic and international challenges remain. For the EU, aligning the European Central Bank policies more proactively, fostering economic growth, and increasing strategic arms transfers to counter US arms transfers to allies could strengthen the EUR's position. For China, liberalizing capital flows, transitioning to innovation-driven growth, and balancing political and economic strategies are crucial for advancing the RMB. Despite these strategies, the study concludes that neither the EUR nor the RMB poses an immediate threat to USD hegemony but suggests that strategic initiatives could enable especially the EUR to challenge the USD hegemony in the future. This research contributes to the academic discourse by providing a comprehensive framework for assessing currency internationalization and its implications for global monetary dynamics. |
| Supervisor | Bokros, Lajos |
| Department | International Relations MA |
| Full text | https://www.etd.ceu.edu/2024/sager_mikkel.pdf |
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