Renminbi in the future international monetary system

The dollar, euro and yen still dominate the international financial system after the global recession. However, the renminbi is expected to be the next international currency with the continued growth of China. Will a forthcoming multiple reserve currency system be an origin of instability? This study analyzes whether or not a prospective G3 plus renminbi cooperative mechanism can be sustained. A basic assumption is that the four countries can solely use or coordinate their policies without losing their national currencies. We conclude that a multi-currency cooperative mechanism is hardly feasible if the welfare of the individual countries is considered. (C) 2011 Elsevier Inc. All rights reserved.