Bahaj, Saleem and Reis, Ricardo 
ORCID: 0000-0003-4844-9483
(2020)
Jumpstarting an international currency.
CEPR Press Discussion Paper (14793).
Centre for Economic Policy Research (Great Britain), London, UK.
Abstract
Monetary and financial policies that lower the cost of credit for working capital in a currency outside of its country can provide the impetus for that currency to be used in international trade. This paper shows this in theory, by exploring the complementarity in the currency used for financing working capital and the currency used for invoicing sales. Financial policies by a central bank can jump-start the use of its currency outside a country's borders. In the data, the creation of 38 swap lines by the People's Bank of China between 2009 and 2018 provides a test of the theory. Signing a swap line with a country is significantly associated with increases in the use of the RMB in payments to and from that country in the following months.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://cepr.org/publications/discussion-papers |
| Additional Information: | © 2020 The Authors |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets |
| Date Deposited: | 10 Feb 2023 10:33 |
| Last Modified: | 11 Dec 2024 19:44 |
| URI: | http://eprints.lse.ac.uk/id/eprint/118140 |
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