Abstract
<p><em><em>This paper explores the derivation of exchange rate and the way of world currency issuing, and some findings are captured as: the world’s currency demand is equal to the global export increment, and that every nation’s world currency needs should equal to their own export increment. Currently, there are issues with the existing world currency system, which many countries or regions call for change. Because all the existing proposals in the field have their constraints, so this paper suggests that the world central bank issuing a global currency with which each country would take its own share and maintain that the world currency supply to be equal to the global export increments. This will be more sustainable for international business and this theory of world currency does have advantage over existing systems.</em></em></p>
Highlights
As the international financing and trading expand, more and more world currencies are needed
For the sake of international business developing fairly and sustainably some major challenges need to be addressed, for example, how to calculate exchange rates fairly and reasonably among countries, and another challenge is how to issue world currency fairly. Addressing these two questions together would simplify the discussion of exchange rate and world currency, as the world currency and exchange rate among countries are inseparable topics of discussion
If the exchange rate among two countries for trading is not calculated properly, fairness in the trading could not be achieved; if world currency system is not properly established, there is no fairness in international trading even if the exchange rate is right
Summary
As the international financing and trading expand, more and more world currencies are needed. For the sake of international business developing fairly and sustainably some major challenges need to be addressed, for example, how to calculate exchange rates fairly and reasonably among countries, and another challenge is how to issue world currency fairly. The exchange rate between two countries is calculated with formula below: The factors affecting exchange rate are new issued money (M1’), domestic total sale (PQ) and yield (Y) increments, nominal economy growth (θ’), import (Im), export (Ex) and inflow (Fi) and outflow (Fo) of foreign currency. The trading surplus and foreign currency reserve (Rf) do exist and they are the important factors affecting exchange rate among countries. Regional one looks worse because economic sovereignty problem is still there It added intermediate link between world currency and national ones, making financing system more complicated and fragile. It explains clearly that the relationship between unfair world currency issue and imbalance economic development (Table 1)
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