THE TRADE CREATION EFFECTS OF BILATERAL CURRENCY SWAPS AND THEIR HETEROGENEITY: AN EMPIRICAL TEST BASED ON THE SYNTHETIC CONTROL METHOD

School of Economics & Management, Shanghai Polytechnic University, China
China

School of Economics & Management, Shanghai Polytechnic University, China
China


Abstract

In recent years, amid profound adjustments in the global economic landscape, the trade creation effects of bilateral local currency swap agreements have garnered considerable attention. Based on panel data spanning 2001–2023 for China and 65 countries, this paper employs the synthetic control method to conduct empirical tests on 20 signatory countries, with a focused analysis of Pakistan, Australia, Indonesia, and Russia. The findings reveal that swap agreements exert a significant overall promotional effect on both imports and exports, yet notable cross-country heterogeneity exists; import responses are generally more rapid than export responses, and for certain countries the export effect lags for several years. Placebo tests corroborate the robustness of the conclusions. The study provides methodological reference for assessing the dynamic transmission of financial instruments to the real economy and offers empirical evidence for optimizing the layout of currency swap arrangements and enhancing the role of renminbi in denominating and settling transactions.

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References


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