Abstract and Keywords
Asian states’ management of their currencies plays a central role in their development strategies, international relations of the region, and the region’s relationship with the rest of the world. The US dollar’s dominance as a currency for international transactions in Asia has been a stable equilibrium serving the political and economic purposes of most of the export-oriented Asian countries. The choice of exchange rate regime among many Asian governments has been driven in large part by countries’ economic growth models, which have favored exports, while path dependence, network externalities, and political rivalry prevented the emergence of regional alternatives to the dollar. Counterintuitively, the widespread use of the dollar facilitated a shift on the part of many Asian countries toward shadowing the renminbi, as the weight of the Chinese economy increases within the region. The extent to which the renminbi displaces the US dollar as a trade, investment, and vehicle currency, however, remains to be seen.
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