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Bilateral swap agreement and Renminbi settlement in cross-border trade

Author

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  • Song, Ke
  • Xia, Le

Abstract

This research empirically examines the impact of China's Renminbi (RMB) bilateral swap agree-ments (BSAs) on the usage of the currency in cross-border trade transactions. By using a unique dataset from SWIFT including cross-border settlement messages of 91 countries/regions between October 2010 and November 2015, we confirm that the signing of a RMB BSA helps to increase the number, the value and the proportion of RMB settlement in cross-border trade. Our results are robust with respect to the choice of different models, including multi-level mixed model, two-stage regression model, and difference-in-difference model. In addition to justifying the effectiveness of China's BSA-signing strategy to promote the RMB usage in trade settlement, our results clarify that the signing of those RMB BSAs is not purely for China's political ends as some scholars claim.

Suggested Citation

  • Song, Ke & Xia, Le, 2019. "Bilateral swap agreement and Renminbi settlement in cross-border trade," BOFIT Discussion Papers 19/2019, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2019_019
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    More about this item

    Keywords

    RMB; Bilateral Swap Agreement; Cross-Border Trade; SWIFT;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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