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Olga Triay Bagur
- 23 March 2026
- WORKING PAPER SERIES - No. 3202Details
- Abstract
- This paper provides the first causal estimate of the economic impact of interlinking payment systems across countries. We exploit a new dataset of payment systems interlinking initiatives, which identifies over 2,000 connections, and employ standard gravity methods to estimate their impact on trade flows. Consistent with trade costs theory, we find that inter-connected countries have around 4% higher trade volumes, roughly half the effect of a trade agreement and a quarter of the effect of a common currency area. Our results isolate the average effect on trade, of directly connecting fast payment systems, net of country pairs already accessing the correspondent banking network. The estimated impact is larger for payment systems that allow wholesale transactions, those that link small countries, which, typically, are less connected to the correspondent banking network, and for geographical areas that face high cross-border payment costs. This suggests that the benefits from interlinking are derived from reduced cross-border trade costs. Our findings are causal – proved by parametric and semi-parametric estimators – and robust to numerous additional controls, including exclusion of the largest interlinked country group, the euro area.
- JEL Code
- E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F15 : International Economics→Trade→Economic Integration
F30 : International Economics→International Finance→General
- 11 June 2025
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2025Details
- Abstract
- Payments play a critical role in the global economy, with cross-border transactions largely processed through correspondent banking networks, which are often slow and costly. Fast payment systems (FPS) have emerged to address these inefficiencies, settling transactions in seconds. However, global FPS connections remain fragmented, concentrated in regional clusters, with limited interoperability due to economic, technical, and geopolitical barriers. Geopolitical tensions significantly impact the likelihood of interlinking FPS, potentially reducing connections and increasing trade costs. To mitigate fragmentation risks, initiatives like the G20 roadmap and the ECB's exploration of interlinking TIPS with other FPS aim to enhance the global payment infrastructure.
- JEL Code
- E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F15 : International Economics→Trade→Economic Integration
F30 : International Economics→International Finance→General