Renminbi Revaluation, Euro Appreciation and Chinese Markets: What Can We Learn From Data?

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Renminbi Revaluation, Euro Appreciation and Chinese Markets: What Can We Learn From Data?

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Paul D. McNelis (Fordham University)
Salih N. Neftci (City University of New York)

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Paul Dominic McNelis

Abstract

This paper examines financial market data to assess the likelihood of renminbi revaluation and its implications for Chinese share price increases, given the continuing appreciation of the Euro against the U.S. dollar. We find that the 3-month non-deliverable forward premia are key series linking these variables. The forward premia predict series A share-price changes, while Euro/US dollar exchange rates in turn predict foreward-premia. Bayesian models outperform standard linear models for forecasting performance.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 012006.

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Length: 19 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:hkm:wpaper:012006

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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