Abstract
We examine how bilateral currency swap arrangements (BSAs) conducted by the People's Bank of China affect bilateral exchange rate volatility from 2009 to 2019. Applying an intervention analysis based on the model-selection approach, we find 21 (16) significant (negative) effects out of the 37 cases. The results imply that BSAs may depress bilateral exchange rate volatility, but the effects vary across countries and sometimes can even be reversed. Further investigation shows that financial market development and bilateral political relationships are significant determinants of such an influential pattern. These findings contribute to the study of central bank swap and Renminbi internationalization.
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