China’s Bilateral Currency Swap Lines

Zhitao Lin (), Wenjie Zhan () and Yin-Wong Cheung
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Zhitao Lin: Huazhong University of Science & Technology
Wenjie Zhan: Huazhong University of Science & Technology

No GRU_2016_013, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

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 (search for similar items in EconPapers)
JEL-codes: F30 F33 F36 (search for similar items in EconPapers)
Pages: 30 pages
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Published in China & World Economy, Volume 24-6, Pages 19-42

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Related works:
Journal Article: China's Bilateral Currency Swap Lines (2016)
Working Paper: China's Bilateral Currency Swap Lines (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2016_013

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