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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-44, January.
- James H. Stock & Mark W. Watson, 1999.
NBER Working Papers
7023, National Bureau of Economic Research, Inc.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998.
"Generalized impulse response analysis in linear multivariate models,"
Elsevier, vol. 58(1), pages 17-29, January.
- Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
- Guillermo A. Calvo & Carmen M. Reinhart, 2002.
"Fear Of Floating,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 379-408, May.
- Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
- Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
- Colavecchio , Roberta & Funke, Michael, 2006.
"Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures,"
BOFIT Discussion Papers
16/2006, Bank of Finland, Institute for Economies in Transition.
- Colavecchio, Roberta & Funke, Michael, 2008. "Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures," China Economic Review, Elsevier, vol. 19(4), pages 635-648, December.
- Michael Funke & Roberta Colavecchio, 2008. "Volatility Transmission between Renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures," Quantitative Macroeconomics Working Papers 20812, Hamburg University, Department of Economics.
- Roberta Colavecchio & Michael Funke, 2008. "Volatility Transmission between Renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures," Quantitative Macroeconomics Working Papers 20803, Hamburg University, Department of Economics.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001.
"Modeling and Forecasting Realized Volatility,"
Center for Financial Institutions Working Papers
01-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Anderson, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Labys, Paul, 2002. "Modeling and Forecasting Realized Volatility," Working Papers 02-12, Duke University, Department of Economics.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001. "Modeling and Forecasting Realized Volatility," NBER Working Papers 8160, National Bureau of Economic Research, Inc.
- Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
- Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, CESifo, vol. 52(2), pages 246-275, June.
- Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
- Litterman, Robert B, 1986.
"Forecasting with Bayesian Vector Autoregressions-Five Years of Experience,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 4(1), pages 25-38, January.
- Robert B. Litterman, 1985. "Forecasting with Bayesian vector autoregressions five years of experience," Working Papers 274, Federal Reserve Bank of Minneapolis.
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2008. "Pitfalls in Measuring Exchange Rate Misalignment: The Yuan and Other Currencies," NBER Working Papers 14168, National Bureau of Economic Research, Inc.
- Fang, Ying & Huang, Shicheng & Niu, Linlin, 2012. "De facto currency baskets of China and East Asian economies: The rising weights," BOFIT Discussion Papers 2/2012, Bank of Finland, Institute for Economies in Transition.
- Niehans, Jurg, 1981. "Static deviations from purchasing-power parity," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 57-68.
- Park, Jinwoo, 2001. "Information flows between non-deliverable forward (NDF) and spot markets: Evidence from Korean currency," Pacific-Basin Finance Journal, Elsevier, vol. 9(4), pages 363-377, August.
- Chao, John & Corradi, Valentina & Swanson, Norman R., 2001. "Out-Of-Sample Tests For Granger Causality," Macroeconomic Dynamics, Cambridge University Press, vol. 5(04), pages 598-620, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.