Do China's policy measures for RMB internationalization foster currency co-movements?

Jiyoun An, Hyo Sang Kim and Bokyeong Park

International Review of Economics & Finance, 2024, vol. 91, issue C, 1033-1050

Abstract: This paper examines the factors driving the co-movement between the renminbi (RMB) and other currencies, with a particular focus on the impact of China's institutional arrangements on RMB co-movements. Using panel data covering 32 countries from 2005 to 2020, the study finds that, among the institutional arrangements, clearing banks and direct trading strengthen the RMB's influence on bilateral exchange rates, while currency swaps weaken it. These institutional arrangements play a role in amplifying the impact of economic linkages on RMB weights. Currency swaps can enhance the RMB's weight through trade linkages, while clearing banks and direct trading create amplifying effects through financial linkages. Overall, China's institutional arrangements contribute significantly to greater RMB co-movements through both a direct effect and an amplifying effect.

Keywords: Exchange rates; Currency co-movements; Renminbi internationalization (search for similar items in EconPapers)
JEL-codes: F31 F33 F38 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:91:y:2024:i:c:p:1033-1050

DOI: 10.1016/j.iref.2024.01.019

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