Currency Convertibility and Linkage Between Chinese Official and Swap Market Exchange Rates

Yang, Jian; Leatham, David J.

doi:10.1093/cep/19.3.347

Cited by 12 publications

(4 citation statements)

References 18 publications

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“…Third, in contrast to the findings of Yang and Leatham (2001), we find that no long-term equilibrium relationship exists between the C.N.Y. and N.D.F.…”

Section: Introductioncontrasting

confidence: 99%

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Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?

Wang

Zhang

et al. 2019

Economic Research-Ekonomska Istraživanja

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This study utilises a time-varying wavelet analysis to examine the relationship between the onshore spot market and the offshore non-deliverable forward (N.D.F.) market of the Chinese Yuan (C.N.Y.). Given the presence of structural changes in the two markets, we did not find any stable causality during the sample period. However, in some sub-samples, we found that there is a strong nonlinear causal relationship running from the onshore spot market to the offshore N.D.F. market. Ties between the two markets are closer after the widening of the onshore trading band, first in April 2012, second in March 2014 and again in August 2015. The onshore spot market is heavily influenced by interventions by the People's Bank of China (P.B.C.). These findings imply that offshore N.D.F. market development is not divorced from onshore development, as developments in the onshore spot market influence the offshore N.D.F. market. The results show that the exchange rate markets for the C.N.Y. are not efficient. Thus, to successfully internationalise the C.N.Y., financial expansion of the onshore spot market should keep pace with the growing offshore N.D.F. market to minimise destabilisation of the C.N.Y.

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“…Third, in contrast to the findings of Yang and Leatham (2001), we find that no long-term equilibrium relationship exists between the C.N.Y. and N.D.F.…”

Section: Introductioncontrasting

confidence: 99%

“…markets, noting that the two markets were driven by different participants with different exchange rate expectations (e.g., Yang & Leatham, 2001;Owyong et al, 2015). In a study by Yang and Leatham (2001), the C.N.Y. and N.D.F.…”

Section: Literature Reviewmentioning

confidence: 99%

Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?

Wang

Zhang

et al. 2019

Economic Research-Ekonomska Istraživanja

View full text Add to dashboard Cite

show abstract

“…Much work has been conducted on onshore spot and offshore NDF relationships. Specifically for the NDF, the extant literature finds that NDF/CNY rates are cointegrated (Chen, Gong, & Zheng, ; Huang & Wu, ; Sun & Niu, ; Wang & Shang, ) while Yang and Leatham () note that rate cointegration only emerged once partial currency convertibility was allowed. Thus, the NDF and CNY markets share a long‐run dynamic process wherein pricing differentials eventually correct, yet may be subject to policy shocks.…”

Section: Introductionmentioning

confidence: 99%

The Price Discovery Puzzle in Offshore Yuan Trading: Different Contributions for Different Contracts

Ding

Tse

Williams

2012

Journal of Futures Markets

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The People's Bank of China (PBC) lifted yuan trading restrictions in July of 2010 that led to offshore yuan spot trading in Hong Kong. Based on causality analyses, we find that price discovery is absent between the onshore and offshore spot markets. However, we document the presence of price discovery between onshore spot and offshore nondeliverable forward (NDF) rates. These seemingly inconsistent results present a puzzle wherein one offshore market appears to be more informationally integrated with the onshore market than another. We conclude that price discovery differences in the offshore markets stem from the offshore spot and forward contracts tracking different aspects of yuan rates (e.g., the offshore nondeliverable rate tracks onshore spot rates whereas the offshore spot rate tracks onshore interest rates). Moreover, the introduction of offshore spot trading in Hong Kong has led to an increase in cross‐market price discovery between onshore spot and offshore NDF rates. © 2012 Wiley Periodicals, Inc. Jrl Fut Mark 34:103–123, 2014

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“…We also apply a relatively new unit root test with potential multiple structural breaks to provide more robust evidence on nonstationarity of RMB exchange rates under the managed floating regime and to better address the possibility that a potentially stationary RMB data generating process plus some trend breaks could be mistaken as a nonstationary RMB process (e.g., Melvin & Zhou, ; Yang & Leatham, ).…”

mentioning

confidence: 99%

Information Flow Between Forward and Spot Markets: Evidence From the Chinese Renminbi

Tong

Wang

Yang

2015

Journal of Futures Markets

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We apply a new model selection approach that allows for the joint determination of structural breaks and cointegration to examine the term structure of Chinese Renminbi (RMB)‐U.S. dollar spot and forward exchange rates during the managed‐floating period of 2005–2013. We find that the RMB market has exhibited different dynamic relationships between spot and forward exchange rates over time, apparently due to significant policy changes. Offshore forward rates with either shorter or longer maturities can substantially explain the in‐sample variation of the onshore spot exchange rate at longer horizons, while only the offshore forward rate with a shorter maturity can significantly predict RMB onshore spot rate changes out‐of‐sample. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:695–718, 2016

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Currency Convertibility and Linkage Between Chinese Official and Swap Market Exchange Rates

Cited by 12 publications

References 18 publications

Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?

Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?

The Price Discovery Puzzle in Offshore Yuan Trading: Different Contributions for Different Contracts

Information Flow Between Forward and Spot Markets: Evidence From the Chinese Renminbi

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