Interest rate fixation, excessive fluctuations and exchange rate management in China

Tong, Bing; Yang, Guang

doi:10.1080/00036846.2020.1870920

Cited by 4 publications

(2 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This likely reflects capture of non-linearities for most of the currencies (EUR, GBP, AUD, CHF, JPY and CAD) (e.g., Serletis et al, 2012) and other assets, both individually and in the dynamic dependence structures between the original currency, and commodity, stock, and implied volatility index return/change series. In the case of the CNY, which displays limited evidence of Granger causality, China's use of exchange rate targets, capital controls, and monetary policy interventions to sterilize foreign currency inflows, suggest that its exchange rate system is essentially a form of currency peg (Tong and Yang, 2021). This means that rather than being partly absorbed through shifts in the exchange rate, it will be reflected in shifts in both monetary and real variables (e.g., inflation and GDP growth).…”

Section: Resmentioning

confidence: 99%

Nonlinear Dependence and Spillovers between Currency Markets and Global Financial Market Variables

Jiang¹,

Hernández²,

McIver³

et al. 2022

Preprint

View full text Add to dashboard Cite

The widespread integration and growing dependence among currency, stock and commodity markets make these markets often very vulnerable to shocks and at risk of collapse at the same time. As a result, these trends threaten the sustainability of the entire financial system. In this study, we explore the spillovers and nonlinear dependences between the seven major foreign ex-change rates, crude oil and gold prices, a global stock price index, and oil and stock implied volatility indices as proxy variables for global risk factors by em-ploying directional spillover network approach. We also use multi-scale de-composition method and nonlinear causality test between these variables to capture multi-level relationships at short and long horizons. Major findings are summarized as follows. First, from the multi-scale decomposition analysis, we identify that Granger causality test results and the direction and strength of return spillovers change with the level of decomposition. Second, the results of nonlinear causality tests show variation in both the significance and direction of Granger causality relationships between the decomposed currency and other series at different timescales, especially for the decomposed oil, gold, and OVX series. Third, the measured directional spillover indices identify the EUR as the largest contributor of connectedness to the other series. The central role of the EUR is a net transmitter of connectedness to gold, oil, the GBP, JPY, and CHF.

show abstract

Section: Resmentioning

confidence: 99%

Nonlinear Dependence and Spillovers between Currency Markets and Global Financial Market Variables

Jiang¹,

Hernández²,

McIver³

et al. 2022

Preprint

View full text Add to dashboard Cite

show abstract

“…This likely reflects the capture of non-linearities for most of the currencies (EUR, GBP, AUD, CHF, JPY, and CAD) (e.g., Serletis et al [63]) and other assets, both individually and in the dynamic dependence structures between the original currency, and commodity, stock, and implied volatility index return/change series. In the case of the CNY, which displays limited evidence of Granger causality, China's use of exchange rate targets, capital controls, and monetary policy interventions to sterilize foreign currency inflows, suggest that its exchange rate system is essentially a form of currency peg [64]. This means that rather than being partly absorbed through shifts in the exchange rate, it will be reflected in shifts in both monetary and real variables (e.g., inflation and GDP growth).…”

Section: X-variablesmentioning

confidence: 99%

Nonlinear Dependence and Spillovers between Currency Markets and Global Economic Variables

Jiang

Hernández

McIver

et al. 2022

Systems

View full text Add to dashboard Cite

The widespread integration and growing systemic dependence among currency, stock, and commodity markets render these markets often very vulnerable to shocks and at risk of collapse at the same time. As a result, these trends threaten the sustainability of the entire financial system. In this study, we aim to explore the spillovers and nonlinear dependencies between the seven major foreign exchange rates, crude oil and gold prices, a global stock price index, and oil and stock implied volatility indices as proxy variables for global risk factors by employing a directional spillover network approach. We also use a multi-scale decomposition method and nonlinear causality test between these variables to capture multi-level relationships at short and long horizons. The major findings are summarized as follows. First, from the multi-scale decomposition analysis, we identify that Granger causality test results and the direction and strength of return spillovers change with the level of decomposition. Second, the results of nonlinear causality tests show variation in both the significance and direction of Granger causality relationships between the decomposed currency and other series at different timescales, especially for the decomposed oil, gold, and OVX series. Third, the measured directional spillover indices identify the Euro–Dollar exchange rate as the largest contributor of connectedness to the other series.

show abstract

The Effects of Energy Supply Shocks and Interest Rate Liberalization in China

Xue

Liang

Tong

2023

Singapore Econ. Rev.

View full text Add to dashboard Cite

Based on a New Keynesian model with a transient interest rate peg and energy inputs in production, we examine the impact of China’s interest rate liberalization on the transmission of energy supply shocks. Theoretical analysis shows that in the face of negative supply shocks, output decreases less or even increases while inflation rises more under a fixed interest rate compared with a flexible interest rate. We construct the Divisia energy index based on Chinese data to test the model predictions. We identify energy supply shocks following the strategy of Kilian ( 2009 ) and obtain impulse responses using the local projection (LP) method proposed by Jordà ( 2005 ). The empirical results are generally consistent with our model predictions.

show abstract

Interest rate fixation, excessive fluctuations and exchange rate management in China

Cited by 4 publications

References 32 publications

Nonlinear Dependence and Spillovers between Currency Markets and Global Financial Market Variables

Nonlinear Dependence and Spillovers between Currency Markets and Global Financial Market Variables

Nonlinear Dependence and Spillovers between Currency Markets and Global Economic Variables

The Effects of Energy Supply Shocks and Interest Rate Liberalization in China

Contact Info

Product

Resources

About