Determinants of the onshore and offshore Chinese Government yield curves
As part of its effort to internationalize the Renminbi, China's government has promoted the establishment of a regulated offshore Renminbi capital market hub in Hong Kong, where, among other activities, it issues RMB-denominated government bonds providing foreign investors access to Chinese bond markets. In a VAR model where yield curves are represented by Nelson-Siegel latent factors and which includes macroeconomic variables, we find that onshore government bond yields are primarily driven by policy-related factors such as the policy rate and money supply, whereas offshore government bond yields are additionally driven by market-related factors such as consumer confidence, GDP and FX rate expectations as well as liquidity constraints. At the current stage of market development there are virtually no spillover effects between the onshore and offshore government bond curves. Our results add quantitative evidence that China's efforts to internationalize its currency results in a simultaneous liberalization of its financial system.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Sonnemannstraße 9-11, 60314 Frankfurt am Main|
Phone: 069 154008-0
Web page: http://www.frankfurt-school.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diebold, Francis X. & Li, Canlin, 2006.
"Forecasting the term structure of government bond yields,"
Journal of Econometrics,
Elsevier, vol. 130(2), pages 337-364, February.
- Francis X. Diebold & Canlin Li, 2002. "Forecasting the Term Structure of Government Bond Yields," Center for Financial Institutions Working Papers 02-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Francis X. Diebold & Canlin Li, 2003. "Forecasting the Term Structure of Government Bond Yields," NBER Working Papers 10048, National Bureau of Economic Research, Inc.
- Diebold, Francis X. & Li, Canlin, 2003. "Forecasting the term structure of government bond yields," CFS Working Paper Series 2004/09, Center for Financial Studies (CFS).
- Ming Zhang, 2012. "Chinese Stylized Sterilization: The Cost‐sharing Mechanism and Financial Repression," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(2), pages 41-58, 03.
- Clements, Michael P & GalvÃ£o, Ana Beatriz, 2008. "Macroeconomic Forecasting With Mixed-Frequency Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 546-554.
- Monika Piazzesi, 2005. "Bond Yields and the Federal Reserve," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 311-344, April.
- Fan, Longzhen & Johansson, Anders C., 2009.
"China'S Official Rates And Bond Yields,"
Working Paper Series
2009-3, China Economic Research Center, Stockholm School of Economics.
- Afonso, António & Martins, Manuel M.F., 2012.
"Level, slope, curvature of the sovereign yield curve, and fiscal behaviour,"
Journal of Banking & Finance,
Elsevier, vol. 36(6), pages 1789-1807.
- Afonso, António & Martins, Manuel M.F., 2010. "Level, slope, curvature of the sovereign yield curve, and fiscal behaviour," Working Paper Series 1276, European Central Bank.
- Francis X. Diebold & Glenn D. Rudebusch & S. Boragan Aruoba, 2004.
"The Macroeconomy and the Yield Curve: A Dynamic Latent Factor Approach,"
NBER Working Papers
10616, National Bureau of Economic Research, Inc.
- Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006. "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 309-338.
- Wendy Dobson & Paul R. Masson, 2007.
"Will the Renminbi Become a World Currency?,"
Working Papers Series
10, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Dec 2007.
- Hong, Yongmiao & Lin, Hai & Wang, Shouyang, 2010.
"Modeling the dynamics of Chinese spot interest rates,"
Journal of Banking & Finance,
Elsevier, vol. 34(5), pages 1047-1061, May.
- Yongmiao Hong & Hai Lin & Shouyang Wang, 2013. "Modeling the Dynamics of Chinese Spot Interest Rates," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
- Yuning Gao & D’Maris Coffman, 2013. "Renminbi internationalization as a response to the global imbalance," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(2), pages 139-151, May.
- Liu, Li-Gang & Pauwels, Laurent, 2011.
"Do External Political Pressures Affect the Renminbi Exchange Rate?,"
10/2011, University of Sydney Business School, Discipline of Business Analytics.
- Liu, Li-Gang & Pauwels, Laurent L., 2012. "Do external political pressures affect the Renminbi exchange rate?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1800-1818.
- Li-gang Liu & Laurent Pauwels & Jun-yu Chan, 2008. "Do External Political Pressures Affect the Renminbi Exchange Rate?," Working Papers 0805, Hong Kong Monetary Authority.
- Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
- Andrew Ang & Monika Piazzesi, 2001.
"A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables,"
NBER Working Papers
8363, National Bureau of Economic Research, Inc.
- Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 745-787, May.
- Fan, Longzhen & Johansson, Anders C., 2009. "What Moves Bond Yields In China?," Working Paper Series 2009-9, China Economic Research Center, Stockholm School of Economics.
- Samar Maziad & Joong Kang, 2012. "RMB Internationalization; O+L5022nshore/Offshore Links," IMF Working Papers 12/133, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:zbw:fsfmwp:202. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.