“…In turn, if a firms is pricing exports in a currency it has an incentive to get credit for working capital in that currency as well (Bahaj and Reis, 2020b). Empirically, Bahaj and Reis (2020b), Song and Xia (2020), Georgiadis et al (2021) find that the PBoC's swap lines are associated with an increased use of the RMB for cross-border payments and for trade invoicing. Insofar as there are rewards of having an international currency, this provides a separate benefit of the liquidity lines.…”
Section: Liquidity Lines As a Tool To Encourage International Trade A...mentioning
confidence: 97%
“…For example, over the course of 2014 and 2015 the central bank of Argentina (BCRA) borrowed RMB to buy USD in order to bolster its reserves, although none of the USD appear to have been spent (McDowell, 2019). This goes against the typically stated goal of the PBoC's swap lines being for trade settlement (Georgiadis et al, 2021). However, the PBoC did not publicly protest the arrangement and some sources report that the BCRA's move had the PBoC's tacit approval (Tresor Economics, 2018).…”
Section: The Recipient Central Bank's Use Of the Moneymentioning
Liquidity lines between central are a key part of the international financial safety net. In this handbook chapter, we summarize their history, describe their institutional features and draw lessons for future research, policymakers and practitioners.
“…In turn, if a firms is pricing exports in a currency it has an incentive to get credit for working capital in that currency as well (Bahaj and Reis, 2020b). Empirically, Bahaj and Reis (2020b), Song and Xia (2020), Georgiadis et al (2021) find that the PBoC's swap lines are associated with an increased use of the RMB for cross-border payments and for trade invoicing. Insofar as there are rewards of having an international currency, this provides a separate benefit of the liquidity lines.…”
Section: Liquidity Lines As a Tool To Encourage International Trade A...mentioning
confidence: 97%
“…For example, over the course of 2014 and 2015 the central bank of Argentina (BCRA) borrowed RMB to buy USD in order to bolster its reserves, although none of the USD appear to have been spent (McDowell, 2019). This goes against the typically stated goal of the PBoC's swap lines being for trade settlement (Georgiadis et al, 2021). However, the PBoC did not publicly protest the arrangement and some sources report that the BCRA's move had the PBoC's tacit approval (Tresor Economics, 2018).…”
Section: The Recipient Central Bank's Use Of the Moneymentioning
Liquidity lines between central are a key part of the international financial safety net. In this handbook chapter, we summarize their history, describe their institutional features and draw lessons for future research, policymakers and practitioners.
“…11 Much of this increase in RMB invoicing has been concentrated in Asia, with Cambodia, Korean, Taiwan, Thailand and India invoicing 1%-3% of their cross-border merchandise transactions in RMB in 2020. This is a multiple of the global average (see Georgiadis et al, 2021). Mongolia is an outlier: about 20% of its trade was invoiced in RMB in 2020.…”
Section: The Rmb Punching Below China's Global Economic Weightmentioning
It is widely assumed that the renminbi (RMB) cannot acquire a meaningful place in central bank reserve portfolios without full liberalization of China's capital account. We argue that the RMB can in fact develop into an international reserve currency in the absence of capital‐account convertibility. Trade and investment links can drive use despite limited access to Chinese financial markets. But this route to currency internationalization requires policy support. China must provide access to RMB through loans and the People's Bank of China (PBoC) currency swaps. It must ensure the convertibility of RMB into US dollars in offshore markets. It must provide RMB services at a stable and predictable price. Currency internationalization without full capital‐account liberalization thus requires the RMB to be backed by dollar reserves, which the PBoC consequently will continue to hold and use. Hence, we do not foresee RMB internationalization as supplanting dollar dominance.
“…This effect is increasing in the share of imports invoiced in US dollars (Ma, Schmidt-Eisenlohr, and Zhang 2020). In turn, the share of US dollar-denominated trade invoicing correlates positively with economies' participation in global value chains (GVCs) because of the strategic complementarity between price setting and integration in GVCs (Georgiadis et al 2021…”
Section: Risks Of Entrenched Us Dollar Dependencementioning
The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they v TABLES, FIGURES, AND BOXES TABLES 1.1
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