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What Drives Growing Currency Co-movements with the Renminbi?

Author

Listed:
  • Park, Bokyeong

    (Kyung Hee University)

  • An, Jiyoun

    (Kyung Hee University)

Abstract

China’s increasing trade volume and continuous integration with global financial markets have strengthened the influences of the renminbi on the exchange rates of different currencies. Previous studies find closer co-movements between the renminbi and other currencies. This paper is novel to investigate the underlying determinants of the comovement further, using panel data of over thirty-four countries. Our results show that stronger bilateral trade and financial linkages with China have a positive association with the currency co-movement. Moreover, countries with greater flexibility in exchange rate regimes show stronger co-movements. These findings imply that growing co-movements are the consequence of autonomous decisions at the market rather than that of management by governments or central banks.

Suggested Citation

  • Park, Bokyeong & An, Jiyoun, 2020. "What Drives Growing Currency Co-movements with the Renminbi?," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 24(1), pages 31-59, March.
    • Handle: RePEc:ris:eaerev:0371
    DOI: 10.11644/KIEP.EAER.2020.24.1.371
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    Cited by:

    1. An, Jiyoun & Kim, Hyo Sang & Park, Bokyeong, 2024. "Do China's policy measures for RMB internationalization foster currency co-movements?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1033-1050.
    2. Shekhar Hari Kumar & Vimal Balasubramaniam & Ila Patnaik & Ajay Shah, 2020. "Who cares about the Renminbi?," 2020 Papers pha1373, Job Market Papers.

    More about this item

    Keywords

    Currency Co-movements; Renminbi; Trade Linkage; Financial Linkage; Exchange Rate Regime;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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