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IMF names Chinese yuan one of world’s elite currencies

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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.

Read the News@Northeastern Q&A with Professor Dadkhah.

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