Financial development, money demand, and currency internationalization: based on a multidimensional globalization perspective

Current research on measuring currency internationalization has important implications for effectively examining the scope of currency internationalization among emerging economies. We examined the effects of countries' financial development on their currency internationalization from a multidimensional globalization perspective. Using imbalanced panel data from 167 countries spanning from 1970 to 2021, we constructed a comprehensive indicator for measuring the currency internationalization process. Our findings highlight the significant role of financial development in promoting currency internationalization, particularly under high levels of globalization. The results reveal considerable differences in the impact of financial development between emerging markets and developed economies. Further, globalization of trade and finance were found to be important factors restricting currency internationalization. Thus, this study explains the phased development of currency internationalization from a globalization perspective.