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Constraints on currency market movements – Implications for the RMB exchange rate regime

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  • Zhiyuan Liu
  • Peijie Wang

Abstract

This paper reveals the inherent characteristics behind the statistical phenomena of exchange rate interactions and co‐movements, corroborated empirically by exploring a range of currencies with varied degrees of flexibility. It then studies purposely the historical evolution and development prospects of the RMB exchange rate regime. The RMB exchange rate behaviour and statistical patterns are contrasted with the freely floating currencies in this context. Taking up alternative policy positions, the expected developments in RMB characteristics are deliberated, projecting a trajectory for further RMB regime reforms. How the RMB would fulfil the significant role on the global currency market as signified by its position in the SDR basket is contemplated, beyond a conventional policy shift and under the paradigm that the global currency market tends to be tri‐polar.

Suggested Citation

  • Zhiyuan Liu & Peijie Wang, 2024. "Constraints on currency market movements – Implications for the RMB exchange rate regime," The World Economy, Wiley Blackwell, vol. 47(3), pages 858-879, March.
    • Handle: RePEc:bla:worlde:v:47:y:2024:i:3:p:858-879
    DOI: 10.1111/twec.13425
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    References listed on IDEAS

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    Cited by:

    1. Sun, Yike, 2025. "The effects of the counter-cyclical factor on renminbi co-movements," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 101(C).

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