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Interactions between CNY and CNH Money and Forward Exchange Markets

Author

Listed:
  • David Leung

    (Hong Kong Monetary Authority)

  • John Fu

    (Hong Kong Monetary Authority)

Abstract

We analysed the interactions between the RMB deliverable forward markets in Mainland China and Hong Kong. In order to broaden our perspective, we reference this to the Eurodollar market from the late 1950s to early 1980s. Our findings suggest that onshore regulations, notably the Regulation Q interest rate ceiling, were effective in containing spillovers between the Eurodollar market and the US domestic market. For the CNH market, we found evidence that cross-market spillovers between the Mainland and CNH markets became two-way in 2013, but were more limited and mostly not significant in earlier years. It was found that onshore-to-offshore spillovers were larger than spillovers in the opposite direction in most cases. This probably reflects the fact that the CNH market, though rapidly growing, is small compared to the Mainland market, and possibly more subject to onshore influences. Looking ahead, the Mainland market is expected to continue to play a leading role in onshore-offshore money and foreign exchange market interactions since these markets will be ultimately dominated by the monetary policy stance of the onshore authorities.

Suggested Citation

  • David Leung & John Fu, 2014. "Interactions between CNY and CNH Money and Forward Exchange Markets," Working Papers 132014, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:132014
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    File URL: http://www.hkimr.org/uploads/publication/385/wp-no-13_2014-final-.pdf
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    References listed on IDEAS

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    Cited by:

    1. Hai-Chuan Xu & Wei-Xing Zhou & Didier Sornette, 2018. "Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates," Papers 1803.09432, arXiv.org.
    2. repec:eee:intfin:v:49:y:2017:i:c:p:173-183 is not listed on IDEAS
    3. repec:eee:jimfin:v:86:y:2018:i:c:p:223-243 is not listed on IDEAS

    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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