Abstract
The optimal threshold strategy is put forward for establishing a suitable network for analyzing the correlation among the different exchange rates. The 33 currencies of the world’s major countries and regions are analyzed by the method of network analysis, and the multilateral exchange rate correlation network is established based on the optimal threshold. Combining with geographical features and the exchange rate regime, it is found that the international currency has obvious community structure, which is composed of three levels: the core currency area, the arbitrage currency area and the shadow currency area. The conclusion reveals the structural characteristics of the Jamaica international monetary system.
Highlights
33 currencies of the world’s major countries and regions are analyzed by the method of network analysis, and the multilateral exchange rate correlation network is established based on the optimal threshold
Combining with geographical features and the exchange rate regime, it is found that the international currency has obvious community structure, which is composed of three levels: the core currency area, the arbitrage currency area and the shadow currency area
One of these levels is USD-centered USD core area that is composed of Renminbi and oil currency, and its periphery is composed of the consumption-based currencies in the Eurozone and upstream resource-based currencies, such as Indonesian rupiah and Australian dollar; the second level is the arbitrage currency that is represented by Japanese Yen and Australian Dollar; and the third level is Korean won and U.K. pound as shadow currency
Summary
33 currencies of the world’s major countries and regions are analyzed by the method of network analysis, and the multilateral exchange rate correlation network is established based on the optimal threshold. Our research found that due to the economic and trade characteristics and international political status of countries as well as the choice of exchange rate regimes in countries, 3 major levels are displayed in the overall network of exchange rates. One of these levels is USD-centered USD core area that is composed of Renminbi and oil currency, and its periphery is composed of the consumption-based currencies in the Eurozone and upstream resource-based currencies, such as Indonesian rupiah and Australian dollar; the second level is the arbitrage currency that is represented by Japanese Yen and Australian Dollar; and the third level is Korean won and U.K. pound as shadow currency. The research section in this paper reveals the structural characteristics of international monetary system under the Jamaica system with USD as the core
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