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Actual intervention and verbal intervention in the Chinese RMB exchange rate

Author

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  • Hu, May
  • Li, Yunfeng
  • Yang, Jingjing
  • Chao, Chi-Chur

Abstract

Central bank communication has become a more and more important instrument for the monetary authorization to intervene its exchange rate. This paper investigates the impact of both verbal and actual intervention on the exchange rate of China's currency, which has become the second-used currency in international trade settlement. The empirical evidence indicates that the central bank communication can influence the exchange rate, but the efficient is quite weak. Moreover, the effect of verbal intervention on the exchange rate of the RMB is weaker than that of actual intervention. One possible explanation is that most of the statements made by the governor of central bank on the RMB exchange rate are neutral in China. Overall, this study identifies the difference between the actual and verbal intervention in exchange rate in China, the largest emerging economy in the world.

Suggested Citation

  • Hu, May & Li, Yunfeng & Yang, Jingjing & Chao, Chi-Chur, 2016. "Actual intervention and verbal intervention in the Chinese RMB exchange rate," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 499-508.
  • Handle: RePEc:eee:reveco:v:43:y:2016:i:c:p:499-508 DOI: 10.1016/j.iref.2016.01.011
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    1. repec:eee:chieco:v:46:y:2017:i:c:p:87-96 is not listed on IDEAS

    More about this item

    Keywords

    Central bank communication; Actual intervention; Exchange rate; RMB;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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