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Oral intervention in China: Efficacy of Chinese exchange rate communications

Author

Listed:
  • Zhang, Zhichao
  • Li, He
  • Zhang, Chuanjie

Abstract

This paper analyses China's oral intervention and the efficacy of exchange rate communications by the Chinese monetary authorities. Applying the event study approach, we find that exchange rate communication could help the authorities to impact the Chinese exchange rate level moving in the desired direction. Also, China is responsive to international calls, particularly those from the US calling for the appreciation of the RMB exchange rate. But the response is moderately reluctant as the appreciation would occur after a delay of around two weeks. Finally, using the range-based variance model, confirmative evidence is found that successive, rather than solo, exchange rate communications can calm the exchange rate movement in terms of excess volatility.

Suggested Citation

  • Zhang, Zhichao & Li, He & Zhang, Chuanjie, 2017. "Oral intervention in China: Efficacy of Chinese exchange rate communications," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 24-34.
  • Handle: RePEc:eee:finana:v:49:y:2017:i:c:p:24-34
    DOI: 10.1016/j.irfa.2016.11.006
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    More about this item

    Keywords

    Oral intervention; Event studies; Non-parametric estimation; Exchange rate communication; Exchange rate level and volatility;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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