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Does RMB drive the dynamic of RCEP regional currency FXs?

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  • Guo, Feng
  • Lai, Fujun

Abstract

This paper examines the role of CNY, onshore RMB FX rate, in RCEP currency bloc. Using weekly FX data (2015–2025) across eleven currencies, we employ a dual-method approach: Markov-switching models to study regime-dependent forex co-movements, and a TVP-VAR-SV model for system-wide dynamic connectedness. Three main findings emerge. First, the anchor effects of CNY exhibit significant heterogeneity across RCEP currencies, with effects strong for trade-integrated economies but weak where policy autonomy dominates. Second, the effects also exhibit regime-dependent asymmetry: heightened CNY volatility prolongs turbulent states for currencies of export-oriented economies, whereas CNY stability anchors calm states for financially integrated partners. Third, while CNY functions as a net transmitter of systemic risks within RCEP forex markets, its spillovers evolve non-monotonically with global shocks and regional integration phases. Overall, our findings characterize RMB’s identifiable yet circumscribed emergence as a regional forex anchor; RMB internationalization within RCEP remains substantive but structurally bounded.

Suggested Citation

  • Guo, Feng & Lai, Fujun, 2026. "Does RMB drive the dynamic of RCEP regional currency FXs?," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x25003567
    DOI: 10.1016/j.pacfin.2025.103019
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    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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