Jumpstarting an International Currency
Speaker(s)Saleem Bahaj (University College London and Bank of England, United Kingdom)
LocationTinbergen Institute, room 1.01
Date and time
October 21, 2021
16:00 - 17:15
Monetary and financial policies that lower the cost of credit for working capital in a
currency outside of its country can provide the impetus for that currency to be used in international trade. This paper shows this in theory, by exploring the complemen-
tarity in the currency used for financing working capital and the currency used for invoicing sales. Financial policies by a central bank can jump-start the use of its cur-
rency outside a country’s borders. In the data, the creation of 38 swap lines by the People’s Bank of China between 2009 and 2018 provides a test of the theory. Signing
a swap line with a country is significantly associated with increases in the use of the
RMB in payments to and from that country in the following months.
Joint paper with Ricardo Reis (London School of Economics).
Read full paper here.