Yen/Dollar volatility and Chinese fear of floating: Pressures from the NDF market
AbstractThis paper examines financial market data to assess the likelihood of Renminbi appreciation and its implications for Chinese financial markets, given the continuing volatility of the exchange rate between the US Dollar and the Japanese Yen. Using VAR and Bayesian VAR estimation, we find that the 3-month Non-deliverable Forward premia are a key series which link Yen/Dollar volatility to financial market movements in China through speculative pressure. By contrast, the NDF market for the Korean Won, based on more flexible spot exchange market and open access by domestic banks, plays little or no role linking Yen/Dollar to domestic currency or financial markets in Korea.
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Bibliographic InfoArticle provided by Elsevier in its journal Pacific-Basin Finance Journal.
Volume (Year): 22 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/pacfin
Prediction; Bayesian forecasting; Out-of-sample Granger tests of causality; Nested models; VAR; Bayesian VAR;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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