China's Bilateral Currency Swap Lines

29 Pages Posted: 8 Mar 2016

See all articles by Zhitao Lin

Zhitao Lin

Jinan University - School of Economics

Zhan Wenjie

Huazhong University of Science and Technology - School of Management

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Date Written: February 3, 2016

Abstract

We study the determinants of China’s bilateral local currency swap lines that were established since the recent global finance crisis. It is found that economic factors, political considerations, and institutional characteristics including trade intensity, economic size, strategic partnership, free trade agreement, corruption, and stability affect the decision of signing a swap line agreement. Once a swap line agreement decision is made, the size of the swap line is then mainly affected by trade intensity, economic size, and the presence of a free trade agreement. The results are quite robust with respect to the choices of the Heckman two-stage framework or the proportional hazard model. The gravity effect captured by distances between China and its counterparts, if present, is mainly observed during the early part of the sample period under consideration.

Keywords: RMB swap lines, Heckman two-stage method, proportional hazard model, trade intensity, political factors and institutional characteristics

JEL Classification: F300, F330, F360

Suggested Citation

Lin, Zhitao and Wenjie, Zhan and Cheung, Yin-Wong, China's Bilateral Currency Swap Lines (February 3, 2016). CESifo Working Paper Series No. 5736, Available at SSRN: https://ssrn.com/abstract=2744528 or http://dx.doi.org/10.2139/ssrn.2744528

Zhitao Lin

Jinan University - School of Economics ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Zhan Wenjie

Huazhong University of Science and Technology - School of Management ( email )

1037 Luoyu Road
Wuhan, Hubei 430074
China

Yin-Wong Cheung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Engineering 2, Department of Economics
University of California
Santa Cruz, CA 95064
United States
831-459-5077 (Fax)

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