An interesting article recently published by the Carnegie Foundation titled “The difficult reality of BRICS’ de-dollarization efforts—and the role of the renminbi”written by Robert Greene.
This article covers many aspects of de-dollarization and the nature of international currencies. De-dollarization may involve increasing the use of local currencies, but I will focus on replacing reliance on foreign currencies. In this case, this table is useful.
source: Cohen (1971).
Here are some pictures of the major reserve currencies held by the BRICS countries.
figure 1: Share of U.S. dollar foreign exchange holdings by central bank. source: It-McCauley Databaseand FLAR.
Next are Euro holdings; note the change in proportions.
figure 2: Share of euro foreign exchange holdings by central bank. source: It-McCauley Databaseand FLAR.
Only Russia’s dollar holdings fell significantly. What about the RMB? The information we have here is very limited.
image 3: The share of RMB foreign exchange held by the central bank. source: It-McCauley Databaseand FLAR.
How far do their holdings differ from the ratios implied by standard empirical determinants of reserve currency country GDP, relative inflation, exchange rate standard deviation, FX turnover by location, anchor currency, trade shares and geopolitical variables ? There's more to come from ongoing work by Jeffrey Frankel and Hiro Ito.
