Central bank swap arrangements and exchange rate volatility: Evidence from China

Ziliang Yu, Xiaomeng Liu, Zhuqing Liu and Yang Li

Emerging Markets Review, 2023, vol. 56, issue C

Abstract: We examine how bilateral currency swap arrangements (BSAs) conducted by the People's Bank of China affect bilateral exchange rate volatility from 2009 to 2019. Applying an intervention analysis based on the model-selection approach, we find 21 (16) significant (negative) effects out of the 37 cases. The results imply that BSAs may depress bilateral exchange rate volatility, but the effects vary across countries and sometimes can even be reversed. Further investigation shows that financial market development and bilateral political relationships are significant determinants of such an influential pattern. These findings contribute to the study of central bank swap and Renminbi internationalization.

Keywords: Central bank; Bilateral swap arrangements; Exchange rate volatility; Renminbi internationalization; International financial system (search for similar items in EconPapers)
JEL-codes: E58 F31 F33 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:56:y:2023:i:c:s1566014123000493

DOI: 10.1016/j.ememar.2023.101044

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