What Factors Affect the RMB Carry Trade Return for Sustainability? An Empirical Analysis by Using an ARDL Model

Abstract

With the internationalization of RMB and the openness of China’s capital account, the amount of foreign institutions investing in China has increased significantly. Based on China’s daily data from January 2007 to September 2021, this study investigated the factors that affect the RMB carry-trade return for sustainability. By comparing the results of the carry return before and after the foreign-exchange reform on 11 August 2015, this study found that the RMB carry return has become more traceable after the exchange-rate reform. Meanwhile, the model fitting degree of explaining the RMB carry return was higher, and there were fewer missing variables. Therefore, this study found that after the RMB-exchange-rate mechanism became more market oriented, the RMB carry return became more reasonable, and the carry trade can play a better role in foreign-exchange pricing. Meanwhile, after using the RMB non-deliverable forwards (NDF) to construct a carry-trade position to perform the robustness test, such results were consistent. With different results before and after the exchange-rate reform, this study can provide references for policy makers and investors for sustainable development.

The Impact of Economic Growth, Industrial Transition, and Energy Intensity on Carbon Dioxide Emissions in China

“…The econometric model above is not linear [47]. In order to obtain consistent and useful results, all variables were converted into natural logarithms [48].…”

“…Energy intensity (ENERGY). Since energy intensity is a measure of energy efficiency [46][47][48], which can reflect the level of technology, this paper selects energy intensity as the proxy variable of technique effect. Furthermore, whether energy intensity has a significant reduction effect or rebound effect on CO 2 emissions was explored.…”