Does RMB Internationalization Promote Cross-Border Trade?

Yang Jiao (), Ohyun Kwon and Saiah Lee
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Yang Jiao: Singapore Management University

No 2024-13, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: We investigate the internationalization of Renminbi (IoR) since 2006 by examining its increased utilization among Korean exporters to China. Employing proprietary data fromKorean customs, which includes detailed invoicing information, our analysis reveals that products invoiced, either fully or partially, in RMB have experienced more rapid export growth. Furthermore, firms adopting RMB invoicing also exhibit faster export growth to China after controlling for relevant observables. Our findings remain robust when employing an instrumental variable approach to address potential endogeneity concerns. With the help of a currency invoicing model that demonstrates different impact channels, we show that the increased trade volume is due to Chinese importers facing lower currency costs when purchasing RMB-invoiced products compared to USD-invoiced products.

Keywords: RMB internalization; invoicing currency; international trade (search for similar items in EconPapers)
JEL-codes: D22 F14 F31 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2024-09-06
New Economics Papers: this item is included in nep-cna, nep-int, nep-ipr, nep-pay and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2024_013

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