What Are the Advantages of Commodity Money?

The term currency advantage appears in the book Currency Advantage and Bank Internationalization. The research in this paper finds that the internationalization of a country's currency and the internationalization of banks in the currency-issuing country have a mutually-conditional and mutually-promoting relationship. Compared with non-internationalized currency issuer banks, currencies with a higher degree of internationalization have a "monetary advantage", which has a positive effect on increasing the internationalization of banks in the currency issuer country. For example, the internationalization of the British banking industry for the British pound, the American banking industry for the US dollar, the Japanese banking industry for the Japanese yen, and the French, German, and Spanish banking industries for the euro.

Currency advantage

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The term currency advantage appears in the book Currency Advantage and Bank Internationalization. The research in this paper finds that the internationalization of a country's currency and the internationalization of banks in the currency-issuing country have a mutually-conditional and mutually-promoting relationship. Compared with non-internationalized currency issuer banks, currencies with a higher degree of internationalization have a "monetary advantage", which has a positive effect on increasing the internationalization of banks in the currency issuer country. For example, the internationalization of the British banking industry for the British pound, the American banking industry for the US dollar, the Japanese banking industry for the Japanese yen, and the French, German, and Spanish banking industries for the euro.

Monetary advantage means that as a country's currency evolves from a sovereign currency to an international currency and then to a global standard currency, it can provide special convenience for the international development of a country's commercial banks. At the same time, the internationalization of large commercial banks Development will in turn consolidate and enhance the sovereign currency's position in the world system. ^[1]

From the perspective of theory, currency advantage is the extension and development of comparative advantage theory in the field of currency. Monetary advantages are reflected in the following seven areas:

First of all, the country's commercial banks have strong local currency assets, have a large scale advantage in the local currency financial market, and have much richer operating experience in local currency operations than other international banks.

Secondly, the country's commercial banks have the support of the monetary authorities and have better information on monetary policy.

Third, the enhancement of the country's currency's international status will make large commercial banks one of the main contributors of coin tax revenue.

Fourth, with the increasingly stable international dominance of sovereign currencies, the cost of developing or supporting overseas mergers and acquisitions in the country's large commercial banks will decrease, which will enhance its overseas mergers and acquisitions capabilities and accelerate the overseas expansion of large commercial banks.

Fifth, large commercial banks will play a major role in the innovation, design, and marketing of currency-denominated financial products and services. The innovation of these products and services will also help stabilize the currency's international status.

Sixth, large commercial banks will play a major role in the domestic and foreign circulation mechanism of sovereign currencies.

Seventh, large commercial banks are financial entities that exercise pricing power in offshore currency centers. An efficient market maker is an important support for the international influence of the sovereign currency. ^[1]