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Can bilateral RMB swap reduce monetary policy spillovers from the United States to China?

Mi Zhang, Ahmet Sensoy, Duc Khuong Nguyen and Feiyang Cheng

Journal of International Financial Markets, Institutions and Money, 2025, vol. 101, issue C

Abstract: This study analyzes the impact of bilateral RMB swap agreements on the transmission of US monetary policy to China, while focusing on the underlying mechanisms and potential heterogeneous effects. Our findings demonstrate that these agreements significantly attenuate US monetary policy spillovers to China. Mechanistically, we show that bilateral swaps promote Chinese exports to trading partner countries, thereby mitigating the negative consequences of US monetary policy. Notably, agreements with emerging economies exhibit a stronger mitigating effect than those with advanced economies. These results offer policymakers valuable insights for managing international monetary policy spillovers.

Keywords: Bilateral RMB swap; Spillovers; RMB internationalization; Trade channel; China’s export (search for similar items in EconPapers)
JEL-codes: E52 F33 F42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:101:y:2025:i:c:s1042443125000472

DOI: 10.1016/j.intfin.2025.102157

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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