Advanced Search
MyIDEAS: Login to save this paper or follow this series

Do External Political Pressures Affect the Renminbi Exchange Rate?

Contents:

Author Info

  • Li-gang Liu

    (Research Department, Hong Kong Monetary Authority)

  • Laurent Pauwels

    (Research Department, Hong Kong Monetary Authority)

  • Jun-yu Chan

    (Research Department, Hong Kong Monetary Authority)

Abstract

This paper investigates whether external political pressures calling for faster renminbi (RMB) appreciation have any statistically significant effect on both the daily returns and the conditional volatility of the RMB central parity rate. We construct various external pressure indicators according to the sources of foreign political pressures pertaining to the RMB exchange rate, with a special emphasis on the pressures originated in the United States. After controlling for the underlying domestic factors, we find that neither the overall foreign pressure indicator nor the US-specific pressure indicator has any significant influence on RMB¡¦s daily returns. However, there is strong evidence to suggest that external pressures, and especially those from US sources, have a statistically significant impact on the conditional volatility of the RMB exchange rate. In other words, even though external pressures do not seem to have systematic influence on the speed of the RMB appreciation, they do seem to influence the uncertainty in the daily changes of the RMB exchange rate.

Download Info

If 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.
File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP08_05_full.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Hong Kong Monetary Authority in its series Working Papers with number 0805.

as in new window
Length: 35 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:hkg:wpaper:0805

Contact details of provider:
Postal: 55th Floor, Two International Finance Centre, 8 Finance Street, Central
Phone: (852)28788261
Fax: (852)28781892
Email:
Web page: http://www.info.gov.hk/hkma/
More information through EDIRC

Related research

Keywords: Renminbi exchange rate; Conditional volatility; Event studies; Macroeconomic news or surprises;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Frankel, Jeffrey A & Wei, Shang-Jin, 2007. "Assessing China’s Exchange Rate Regime," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6264, C.E.P.R. Discussion Papers.
  2. Funke, Michael & Gronwald, Marc, 2007. "The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 20/2007, Bank of Finland, Institute for Economies in Transition.
  3. Rasmus Fatum & Michael Hutchison, 2003. "Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan," NBER Working Papers 9648, National Bureau of Economic Research, Inc.
  4. Fratzscher, Marcel, 2004. "Communication and exchange rate policy," Working Paper Series, European Central Bank 0363, European Central Bank.
  5. Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(1), pages 161-190, February.
  6. Rasmus Fatum & Michael M. Hutchison, . "Is Sterilized Foreign Exchange Intervention Effective After All? An Event Study Approach," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 99-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  7. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
  8. 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, Hamburg University, Department of Economics 20803, Hamburg University, Department of Economics.
  9. Christopher J. Neely, 2005. "An analysis of recent studies of the effect of foreign exchange intervention," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Nov, pages 685-718.
  10. Jeffrey A. Frankel & Shang-Jin Wei, 1994. "Yen Bloc or Dollar Bloc? Exchange Rate Policies of the East Asian Economies," NBER Chapters, National Bureau of Economic Research, Inc, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 295-333 National Bureau of Economic Research, Inc.
  11. Fung, Hung-Gay & LEUNG, Wai K. & Zhu, Jiang, 2004. "Nondeliverable forward market for Chinese RMB: A first look," China Economic Review, Elsevier, Elsevier, vol. 15(3), pages 348-352.
  12. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, National Bureau of Economic Research, Inc, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
  13. Li, W K & Ling, Shiqing & McAleer, Michael, 2002. " Recent Theoretical Results for Time Series Models with GARCH Errors," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 16(3), pages 245-69, July.
  14. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
  15. Humpage, Owen F., 2000. "The United States as an informed foreign-exchange speculator," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 10(3-4), pages 287-302, December.
  16. Bonser-Neal, Catherine & Tanner, Glenn, 1996. "Central bank intervention and the volatility of foreign exchange rates: evidence from the options market," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(6), pages 853-878, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Loechel, Horst & Packham, Natalie & Walisch, Fabian, 2013. "Determinants of the onshore and offshore Chinese Government yield curves," Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management 202, Frankfurt School of Finance and Management.
  2. Xiaojing Zhang & Tao Sun, 2009. "Spillovers of the U.S. Subprime Financial Turmoil to Mainland China and Hong Kong SAR," IMF Working Papers, International Monetary Fund 09/166, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hkg:wpaper:0805. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Chan).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.