Professor of Economics Kamran Dadkhah explains the rationale behind reserve currencies, the process that led to the yuan’s inclusion, and what implications the IMF decision might have for the world economy going forward.
In the first such change since 1999, the International Monetary Fund announced on Monday that the Chinese yuan will be recognized among the elite group of worldwide reserve currencies. China’s currency—also known as the renminbi—joins the dollar, yen, euro, and pound as “safe-haven” currencies that governments typically hold in high quantities as foreign exchange reserves. These reserves are used to manage exchange rate risk and pay off international debt obligations.
Here, professor of economics Kamran Dadkhah explains the rationale behind reserve currencies, the process that led to the yuan’s inclusion, and what implications the IMF decision might have for the world economy going forward.
