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We test the impact of globalization on the inflation process (global slack hypothesis) for 15 emerging economies over the period (1996Q1-2019Q4). The novelty of this article lies in testing the impact of globalization on the inflation process. We introduce the smooth transition regression (STR) model of the Phillips curve to capture the gradual impacts of globalization on inflation dynamics. The main results are as follows. (i) The asymmetries in inflation exist that are not captured by the linear Phillips curve. (ii) The domestic output gap remains a main driving force of inflation. (iii) Globalization based on the trade weighted average of the domestic output gap does not affect the inflation process compared to other variables like the trade openness, import prices, real exchange rate and international oil prices. Our results yield important implications that the central banks of the emerging economies can stabilize inflation and output gap in an effective way, exploiting the inflation-output gap relationship. When economic expansion of the trading partners increases, the process of inflation dynamics changes in two economies (Brazil, and China). [ABSTRACT FROM AUTHOR]

An increasing number of countries have launched their central bank digital currencies (CBDC) in recent years, but the economic impacts of CBDC adoption are underexplored. To empirically assess how CBDC adoption influences regional economic integration, this paper investigates the Greater Bay Area, where China carried out one of its first digital renminbi pilot programs. The Greater Bay Area provides a good example because the growing acceptance of digital renminbi in the area can potentially mitigate transaction costs and risks due to the exchange rate volatility of the Chinese renminbi, Hong Kong dollar, and Macao pataca. CBDC adoption can lead to greater real and financial integrations by facilitating cross-border trade in goods and services. This paper evaluates deviations from uncovered interest rate parity, purchasing power parity, and real interest rate parity across Guangdong, Hong Kong, and Macao based on monthly interest rate and price data from January 2016 to December 2022. The time series have mean values near zero, which validate the parity conditions and indicate high degrees of financial, real, and economic integrations. The Markov regime-switching regression model identifies three regimes: (1) pre-Covid, (2) post-Covid, and (3) post-CBDC. The Covid-19 outbreak brought lower integration and stability, but the launch of the CBDC restored some of the pre-Covid integration and stability. Regimes 1 and 2 are persistent, and transitions from Regime 3 back to Regime 1 are probable. Hence, this study finds evidence that CBDC adoption improves regional economic integration in the short and long run. [ABSTRACT FROM AUTHOR]

This paper studies the dynamic relationship between the parallel and official exchange rates of Chinese Yuan (CNY) to U.S. Dollar (USD). Motivated by recent evidence about Bitcoin as a major channel for capital flight from China, we construct a parallel exchange rate implied by Bitcoin prices in the Chinese and U.S. crypto exchanges. While the dual exchange rates are cointegrated, adjustment to long-run equilibrium is non-linear and depends on policy changes and state of the markets. Results from our Markov Switching Vector Error Correction model suggest the parallel exchange rate responds one-to-one in the long-run with respect to an official exchange rate innovation. However, an unexpected change in the parallel rate is countered by an opposite and state-dependent response in the official exchange rate, suggesting active exchange policy interventions by the Chinese monetary authority. [ABSTRACT FROM AUTHOR]

The aims of this study is to investigate the relationship between real exchange rate and innovation in China for the period spanning from 1985 to 2020 using an annual time series data collected from different sources. The study employs autoregressive distributed lag bound test and other econometrics techniques to analyse the short‐run and long‐run relationship among the variables. The findings of the study reveal the existence of short‐run and long‐run relationship between real exchange rate (undervalued RMB) and technological innovation. Furthermore, real exchange rate (undervalued RMB) has positive effect on innovation while real exchange rate volatility is negatively affect innovation. Based on the above empirical findings, the study suggests some policy implications which are considered important for fostering rapid and sustainable economic growth. [ABSTRACT FROM AUTHOR]

This study delves into the impact of exchange rate fluctuations on the bilateral semiconductor trade between Korea and China. We present compelling evidence emphasising the significant role of exchange rate changes in Korea's semiconductor trade with China, affecting both short‐term and long‐term dynamics. Our analysis also reveals an asymmetrical effect of bilateral exchange rates on Korea's semiconductor trade with China. Specifically, we find that exchange rate asymmetries primarily manifest as a long‐term phenomenon in Korea's semiconductor exports to China. At the same time, they influence both short‐ and long‐term dynamics in Korea's semiconductor imports from China. [ABSTRACT FROM AUTHOR]

Illicit financial flows have been an issue of great concern over the past decades due to the challenge they present for economic development in Africa. Illicit financial flows undermine the productivity and growth of African economies as countries lose foreign exchange and tax revenues. Countries lose financial resources needed for development programs, hence undermining social service delivery and retarding poverty reduction. To effectively combat illicit financial flows, it is imperative to examine their determinants. This study seeks to examine the determinants of illicit capital movement in the China‐Africa trade through the mechanisms of trade misinvoicing over the period 1990–2019. The IMF's Direction of Trade Statistics (DOTS) database is used to estimate trade misinvoicing. Estimates using mirror trade data indicate that both exports of Africa to China and imports from China to Africa are mainly underinvoiced. The net effect shows that trade misinvoicing in the China‐Africa trade results in net illicit capital outflow for about 44% of countries in Africa. The results from panel data regressions indicate that tax evasion is one of the major factors behind misinvoicing in China‐Africa trade. In addition, corruption control is found to reduce export underinvoicing, while political stability reduces both export overinvoicing and import overinvoicing. Export misinvoicing increases with the presence of natural resources in the exporting country. Other factors associated with trade misinvoicing in China‐Africa trade include openness to trade, current account deficit, and real exchange rate. The study suggests ways to reduce trade misinvoicing in China‐Africa trade. [ABSTRACT FROM AUTHOR]

This paper empirically examines the role of USD, EUR, and CNY as international payment currencies in Korea, China, and Japan. Our survey of business people in those countries finds that higher convertibility and stability of these currencies in the SDR enhance their acceptability and usability for international payments. However, even during times of instability, USD remains highly accepted and usable as a trade payment currency unlike the cases of EUR and CNY. Therefore, maintaining exchange rate stability is essential for improving the acceptability and usability of EUR and CNY as international payment currencies. [ABSTRACT FROM AUTHOR]

This paper compiles a market-based price index by accounting for the impact of price regulation. We then use the parallel market exchange rate and market-based price index to test Purchasing Power Parity (PPP) over a more extended period (1952–2019) in China. We find weak evidence support PPP when official data are used. However, we fail to find evidence against PPP when the parallel market exchange rate and the market-based price index are used. Moreover, the half-life of the RMB real exchange rate is approximately one year, substantially lower than the consensus estimates of 3–5 years. [ABSTRACT FROM AUTHOR]

The notion that the exchange rate affects exports is well understood. However, whether exporters respond to the expectations of the exchange rate is unknown. Hence, in this study, we construct a measure of exchange rate expectations based on news articles from the Factiva database. We use machine learning to identify and classify news articles about the appreciation of the renminbi (RMB, Chinese currency). Our empirical estimation shows that from 2000 to 2006, Chinese firms reduced their exports in response to a higher expectation of RMB appreciation. They switched their sales from export to domestic markets. The responses are larger in low‐productivity firms, state‐owned enterprises, processing trade, and final goods trade. [ABSTRACT FROM AUTHOR]

This study examines the role of the Chinese renminbi (RMB) as an international anchor currency. After China abandoned its tight US dollar (USD) peg in 2005, the RMB found greater popularity as a reserve currency. This change in the RMB's role reflected China's growing presence in the global economy, even challenging the USD in some of the 155 countries that signed on to the Belt and Road initiative (BRI). Modifying the approach of Ahmed (2021) to estimate basket weights in exchange rate policy for the currencies of 63 advanced and emerging economy currencies, we account for potential drivers of the exchange rate omitted in previous studies to obtain unbiased anchor weight estimates. Unlike earlier studies, we find that the RMB's anchor weight in exchange rate policies remains low irrespective of China's global role. Overall, the weight of the RMB averaged 6 %, compared to an average share of 58 % for the USD and 35 % for the euro. We also find that the USD, euro and yen anchor choices are strongly interlinked. A change in the anchor weight of any of these three currencies results in a strong opposite change in the weights of other two. Changes in RMB anchoring, however, do not materially impact USD, euro and yen weights. An increase in financial markets volatility leads developing countries to increase anchor weights of the developed countries currencies USD, euro and yen. Heightened geopolitical uncertainty only increases the weights of the USD and euro. [ABSTRACT FROM AUTHOR]

This paper builds an open country theoretical model to analyse the spillover impact of the US monetary policy tightening shock on China's economy. GVAR empirical model is employed combined with 22 countries and obtain three main results. First, the US monetary tightening shock causes the rise of the international risk index and the bilateral real exchange rate (the appreciation of the US dollar and the depreciation of the RMB). Second, both China's current account and China's capital outflow show the increased trends combined with the weighted role of foreign economies. Third, as the negative effect of China's capital outflow is higher than the positive effect of China's current account, China's real output declines caused by the US monetary tightening shock. [ABSTRACT FROM AUTHOR]

This paper aims to study the phased influencing factors of renminbi (RMB) exchange rate (CNY against USD) and investigate the predictability of the factors selected by multimodel. We first take the time points when China's main exchange reform policies are launched as the demarcation points and divide the entire sample from July 2005 to December 2020 into three periods. Then, we select the potential predictors using several sources, including all factors (without any selection), the factors selected by each of the five commonly used machine learning methods, the significantly correlated factors selected by traditional regression analysis method, and multimodel‐driven factors. Finally, we predict the exchange rate based on the above selected factors and compare the prediction results. The research results show that the main influencing factors are different in different periods, and the influence of phase events cannot be ignored. Even if their influence on the exchange rate has decreased as a result of the "811" exchange rate reform, the money supply and foreign exchange reserves continue to be the primary drivers of RMB exchange rates during the whole period of the sample. Additionally, RMB exchange rate forward is a robust influencing factor in all periods. By comparing the forecast errors, we find that the prediction accuracy of the factors selected based on multimodel is higher than that of the factors selected based on a single method or the tradition method. The findings of this paper provide the following insights for exchange rate managers: In exchange rate risk management, it is important to pay attention to the impact of macroeconomic factors such as foreign exchange reserves and the impact of staged events, and market expectations of exchange rates are equally important. At the technical level, it is recommended to improve the forecasting accuracy by forecasting exchange rates based on common factors selected by multiple better machine learning methods simultaneously rather than those selected by a single method. [ABSTRACT FROM AUTHOR]

The core objective of this article is to explore the viability of uncovered interest parity and to reconnoiter major determinants of domestic interest rates of the Pakistan and China economies. It is imperative to study the interest rate parity that assistances to comprehend that exactly how exchange rate and domestic interest rate influence foreign interest rate of two economies in emerging trends in international trade. The World Development Indicators is main source of data gathering, and it ranges from 1980 to 2023 for the analysis of both models. This study considers two models, Engle–Granger causality has been applied in Model 1, to analyze the uncovered interest parity, and findings indicate that the exchange rate of each country has no effect on the interest rate of the other country. However, Model 2 investigates the main determinants of domestic interest rate and their long-run associations for Pakistan and China. To capture the long-run association, ARDL estimation technique has been deployed, and findings show the long-run relations and co-integration among the policy variables of both countries. In Pakistan, consumer price index and exchange rate hold positive linking with the domestic interest rate; however, output level is adversely correlated. The error correction term is 91%, confirming the rapidity of equilibrium adjustment when a shock occurs. Regarding the Chinese economy, consumer price index and exchange rate have a negative impact on China domestic interest rate. The results of the error correction model indicate an 80% speed of convergence in the long run. This study suggests that improvement in productivity and exchange rate may assist both economies to experience steady exchange rate and interest rate. [ABSTRACT FROM AUTHOR]

This study employs Bayesian vector autoregressive method to investigate spillover effects from China's monetary policy to Asian economies through the exchange rate, domestic demand, and financial channels. The domestic demand channel plays dominant role to the transmission of China's monetary spillover. While the weak impact of the exchange rate channel could be explained by the positive correlated response of Asian currencies to renminbi shock, the limited influence of the financial channel is due to low financial development and high restrictions on capital flows of China. We suggest Asian authorities should reduce the export reliance on China and prepare macro-prudential instruments to minimize their economies' vulnerability to foreign shocks. [ABSTRACT FROM AUTHOR]

The offshore RMB exchange rate is affected by the supply and demand relationship in the international market, investor sentiment, market liquidity, and other factors, while the onshore RMB exchange rate is mainly affected by government regulation and intervention. Therefore, the offshore RMB exchange rate may be a better reflection of the market's macroeconomic expectations and risk appetite for China. Stock index futures are mainly affected by macroeconomic factors, so studying the correlation between the offshore RMB exchange rate and stock index futures is helpful for risk management, hedging, and price discovery. In this study, we selected the offshore RMB exchange rate, the volume of stock index futures, and the absolute rate of return as variables of investor sentiment. Through the Granger causality test, impulse response function, and variance decomposition, we studied the correlation between the rate of return of stock index futures and the rate of return of the offshore RMB exchange rate. Furthermore, we constructed a GARCH conditional volatility model. It was concluded that the trading volume and the absolute rate of return of stock index futures could explain the price fluctuations of stock index futures very well. A change in the offshore RMB exchange rate yield causes a change in the yield of stock index futures. Policymakers need to pay close attention to changes in the offshore RMB exchange rate in order to better grasp market trends and manage risks accordingly. [ABSTRACT FROM AUTHOR]

This study examines the impact of exchange rate volatility on China-Pakistan trade flows from 1980 to 2020. Using data from 42 import industries and 34 export sectors, bilateral trade between China and Pakistan is analyzed, with the US as the third country. Cointegration analysis reveals a strong relationship between Pakistan-China trade flows and exchange rate volatility. The yuan/dollar exchange rate negatively affects 22 import and 24 export industries in Pakistan, while the rupee/dollar exchange rate negatively impacts 31 import and 17 export industries. Findings suggest that the exchange rate volatility of the third country hampers bilateral trade between Pakistan and China. [ABSTRACT FROM AUTHOR]

In recent years, China has introduced a series of trade and financial liberalization policies and taken a crucial step towards the internationalization of RMB. These new developments bring about one question: how has openness affected the RMB real exchange rate volatility? Our empirical results reveal that in the long term, both trade and financial openness reduce exchange rate volatility; in the short term, the effect of financial openness varies across the three financial sub-accounts. Financial development can magnify (mitigate) the impact of trade openness on volatility in the short (long) term, but its role in affecting the impact of financial openness depends on the financial sub-account involved. Economic policy uncertainty (EPU) weakens the impact of openness on exchange rate volatility. In addition, financial openness absorbs more external shocks than trade openness. Foreign exchange reserves, while offsetting financial crisis shocks, cannot adequately absorb current account balance shocks. [ABSTRACT FROM AUTHOR]

In this paper, we test the validity of the purchasing power parity (PPP) hypothesis between Türkiye and its trading partners - the European Union, China, and the US - for the period from January 2001 to January 2020. We test the stationarity of the real exchange rates for the validity of the PPP hypothesis by applying linear and nonlinear unit root tests. We also employ Fourier-based tests to account for the structural changes that occurred in the considered period. Test results indicate that shocks are temporary, and the PPP hypothesis is valid for Türkiye. [ABSTRACT FROM AUTHOR]

Extant research finds that exchange rate pegs do little to reduce firms' exposure to exchange rate risk in emerging markets. We study whether exchange rate risk exposures under a pegged/controlled floating currency regime can be priced in asset returns using unique data on exchange rate regime changes in China. As the only currency in the basket of International Monetary Fund's (IMF) Special Drawing Rights that is not fully market-driven for its exchange rate formation, the Chinese RMB (renminbi) offers an ideal case to study the pricing of exchange rate risk in pegged and controlled floating regimes. We find a negative stock market reaction to the announcement of changes from a pegged exchange rate to a controlled floating regime, suggesting a negative stock valuation effect of expectation of increased exchange rate exposure to currency appreciation. Under the managed floating exchange rate regime, the volatilities of accounting performance measures are significantly greater for the companies with stronger exposure to foreign-exchange rate risk. More importantly, foreign-exchange rate risk is priced in equity returns under the controlled floating regime but not under the strictly pegged regime. Furthermore, the pricing is stronger for firms with higher sensitivity to economic channels transmitting the exchange rate risk exposure to risk premiums. Overall, our results suggest that currency hedging for a multinational corporation with foreign-exchange exposure is warranted under a controlled floating currency regime. [ABSTRACT FROM AUTHOR]

Have monetary policies asymmetrically responded to targets besides output and inflation? Multiple targets have been found to exist for monetary authority, and uncertainty is having a growing impact on monetary policy in China. Using the nonlinear autoregressive distribution lag (NARDL) model and data from China from 2001Q1–2022Q3, we build a multi-target monetary policy rule with uncertainty and verify the monetary authority's asymmetric reactions to the exchange rate, housing price, and uncertainty. Specifically, the Monetary authority of China responds more to a decline than increase in the output gap, and responds more to an increase than decrease in the inflation gap, exchange rate gap, housing price gap, and uncertainty. This practice supports the view of expanding the targets of the Taylor rule, while also providing innovative ideas for asymmetric monetary policy responses for countries with an economic structure or population density comparable to China. [ABSTRACT FROM AUTHOR]

Motivated by the theoretical link between real exchange rates and oil prices, we utilize a univariate moving average (MA) and an augmented MA (A-MA) model to generate multi-period forecasts of China's real effective exchange rate for 2008–2018. The MA model utilizes past information in real exchange rates, and the A-MA model utilizes past information in both real exchange rates and oil prices. We show that the A-MA forecasts are unbiased and embody useful predictive information beyond that contained in the MA forecasts. In addition, the A-MA forecasts are directionally accurate under asymmetric loss. Such accurate forecasts are useful as inputs for policymakers to design an optimal real exchange rate policy to promote trade and attract foreign investment, and for foreign entities that regard China as an attractive environment for investing in various sectors. [ABSTRACT FROM AUTHOR]

China is transitioning its industrial structure from labor-and resource-intensive industries that previously contributed significantly to the country's GDP growth to technology-intensive industries emphasizing a highly-skilled workforce and sustainability to achieve high-quality economic growth. This paper examines the impact of the RMB exchange rate on high-quality economic growth through theoretical modeling and empirical analysis and discusses the variable of overseas education to explore the mechanism of how the RMB exchange rate and overseas education jointly impact high-quality economic growth. The research sample includes the National Bureau of Statistics data on education from 1995 to 2015, the Bank for International Settlements (BIS) data on the RMB exchange rate, and the added value of China's high-quality economic growth estimated based on the national economy data. An empirical analysis of theoretical expectations was conducted, finding that RMB appreciation could make a positive contribution to China's high-quality economic growth; RMB exchange rate fluctuations would impact the relative cost of overseas education and overseas returnees could have a positive impact on domestic resource utilization efficiency and domestic capacity to make sci-tech innovations, thereby injecting vitality to high-quality economic growth. This study focuses on both the RMB exchange rate and the population studying abroad, providing additional observation dimensions to existing research. [ABSTRACT FROM AUTHOR]

The real bilateral exchange rate between Korean won and Chinese yuan is a crucial factor in balancing trade between Korea and China and has implications for both academics and policymakers. Prior research using symmetry hypotheses on bilateral trade and its heterogeneity among industries is limited. This study re‐examines the symmetric and asymmetric J‐curve phenomenon between them, employing the linear and nonlinear autoregressive distributed lag models. It considered the January 2008–June 2022 trade balance of 75 industries. This analysis shows support for the symmetric (asymmetric) J‐curve in 4 of 12 industries from the linear (nonlinear) model, accounting for 58.55% of the total trade between Korea and China. Furthermore, short‐ and long‐run asymmetries are detected in most industries, affirming the suitability of the nonlinear ARDL method. [ABSTRACT FROM AUTHOR]

Despite considerable reforms of Chinese monetary policy, very few papers have empirically examined the long-run effects of monetary policy on China's economic growth. Our purpose is to shed some light on it. We use money supply, real effective exchange rate, and real interest rate to describe monetary policy of China. We first apply the Granger causality test to annual data from 1980 to 2020 to examine the relationship between monetary policy and China's economic growth measured by Chinese real GDP. Our results suggest both money supply and real effective exchange rate Ganger cause Chinese real GDP, while real interest does not. We then adopt the autoregressive distributed lag (ARDL) model without asymmetric effects and nonlinear ARDL with asymmetric effects of exchange rate to estimate the impact of monetary policy on China's economic growth. Our long-run results indicate that expansion of money supply would promote Chinese real GDP growth. Both higher interest rate and depreciation would hinder China's economic growth. There are asymmetric effects of exchange rate on growth. Finally, the CUSUM and CUSUMQ stability test results reveal that the relationship among money supply, real effective exchange rate, and real interest rate with Chinese real GDP is stable. [ABSTRACT FROM AUTHOR]

Using the DCC‐GARCH model, this study considers distinctive features of China's foreign exchange market to investigate the impacts of RMB internationalization on exchange rates in onshore and offshore markets in different stages during 2010–2017. The results show that policies concerning RMB internationalization, such as interest rate liberalization, exchange rate liberalization, and capital market internationalization, have different impacts on the central parity rate, onshore exchange rate, and offshore exchange rate. In terms of exchange rate liberalization, as the daily trading band was gradually widened in 2012–2015, the onshore exchange rate followed the offshore exchange rate more closely. The central parity rate functioned as a managed floating role. It stabilized onshore and offshore exchange rate fluctuations, while allowing partial marketization. After the exchange rate reform on August 11, 2015, the central parity rate plays a benchmark role based on a more market‐oriented price formation mechanism. It makes the central parity rate regain pricing power in onshore and offshore markets. Further, it promotes exchange rate liberalization and RMB internationalization. Nevertheless, with the slowdown of China's economic growth and the narrowing of the interest rate differential between China and the US, the RMB is under pressure to depreciate, and its volatility increases significantly. [ABSTRACT FROM AUTHOR]

The negative effect of a currency appreciation on a country's exports may be attenuated as its export basket becomes more sophisticated. This paper investigates whether exchange rate changes affect China's exports differently depending on their sophistication levels, as measured by the Product Complexity Index (PCI). We estimate exchange rate elasticities for 1242 export categories disaggregated at the HS‐4‐digit level from 1995 to 2018 using bilateral trade data between China and 190 partner economies. Results indicate that exchange rate fluctuations have negative effects on China's export values, and exchange rate effects are less for more sophisticated exports. This decreasing of exchange rate elasticities for more sophisticated exports holds even when controlling for tariffs. The evidence also shows that, as China has upgraded its export basket over time, the impact of exchange rates on exports has become smaller and less significant. Moreover, the effect of exchange rate related policies on export values via the exchange rate is smaller and less significant for China's more sophisticated exports. [ABSTRACT FROM AUTHOR]

The central parity rate (CPR) is a key instrument for the People's Bank of China (PBC) to manage the Renminbi (RMB) exchange rate. The current method of CPR formation rests on a gauge of the 'demand and supply conditions' in the foreign exchange market. But there are two markets for RMB, the onshore market for CNY and the offshore market for CNH. In this article, we study the role of the offshore market in the CPR formation mechanism and find that changes in CNH have statistically significant predictive power on CPR, especially after the '8.11' reform of 2015. This suggests that PBC does consider the conditions in the offshore market as well as those in the onshore market. [ABSTRACT FROM AUTHOR]

As an export-oriented economy, Taiwan's export income can be easily influenced by internal and international economic factors, including the industrial production index (IPI) and the exchange rate. With China being Taiwan's largest recipient, Taiwan's export income from China is extremely important to Taiwan's economy. Therefore, this research investigates the nonlinear relationship between the IPI of Taiwan and Taiwan's export income from China with the application of a panel smooth transition regression (PSTR) model. In addition, the currency exchange rate of RMB to NTD, which is the transfer variable, is used to examine the dynamic effect. The research period is monthly data ranging from January 2001 to February 2022. The empirical results show that the effect of the IPI of Taiwan on Taiwan's export income with China is dynamic. Moreover, with the existence of a threshold value, its influence changes as the currency exchange rate of RMB to NTD varies over time. Finally, regardless of whether the currency exchange rate of RMB to NTD is above or below the threshold value, as the IPI of Taiwan increases, Taiwan's export income from China also increases, differing only in the degree of increase. [ABSTRACT FROM AUTHOR]

This research investigates the role of China's exchange rate policy uncertainty in manufacturing corporate performance using the fixed effect model and quantile regression model. The findings indicate that an exchange rate policy fluctuation constrains better-performing corporates, but is adverse for those with inferior performance. Government subsidy appears to explain the positive impact, and the effect is enhanced or alleviated somehow by corporate governance, growth, and financial constraints. Exchange rate policy fluctuation also significantly pushes corporates to adjust and upgrade their business, which improves their performance accordingly. Additionally, positive shocks significantly stimulate corporate performance, while negative shocks including global financial crisis and COVID-19 epidemic hinder corporate development. Overall, the risk confrontation ability of Chinese manufacturing enterprises presents a positive upward trend. The China government should thus issue more positive exchange rate policies that could send positive signals to the market and increase the openness of its manufacturing industry. More corporate-friendly policies can be launched, such as adjusting the amount of subsidies for manufacturing enterprises in a timely manner and helping manufacturing enterprises, especially more mature ones, deal with exchange rate policy uncertainty risks. [ABSTRACT FROM AUTHOR]

The Renminbi (RMB) exchange rate regime reform has gone through three stages roughly once every decade since 1994. It is a structural evolution through the unification of dual exchange rates, increased fluctuations and central parity rate reform in response to the dynamic macro environment in China and abroad. This paper unpacks leading and supporting reforms for each stage and reviews the effects. The reform has developed historical experience in adopting progressive strategies, avoiding sharp exchange rate fluctuations in the near term, maintaining appropriate capital controls, and guaranteeing the reform through domestic structural reforms. Achieving a free-floating exchange rate will be the ultimate goal, but it will not be made easily in the short run. During the transitional period, it is recommended that an annual target zone for RMB's effective exchange rate be arranged for the CFETS currency basket, along with necessary capital controls. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to re-examine the impact of exchange rate changes on the trade balance of China and its major trading partners. In the past, many studies have been focussed on the linear effect of exchange rate change, but in this paper, a non-linear Autoregressive Distribution Lag (NARDL) model is proposed. Empirical results show that there are nonlinear and asymmetric effects on the trade balance of exchange rate. In particular, the effect of exchange rate appreciation on Sino-US trade balance is more significant than that of depreciation. A genuine devaluation of the domestic currency would improve the balance of the domestic trade. However, the opposite effect is found in the case of Sino-Japan and the Euro, and the depreciation of the currency will make the trade balance worse. These results provide a solid basis for understanding the relation of exchange rate variation and trade balance. In terms of economic reality, it is also a useful reference for adjusting exchange rate and commercial policy. [ABSTRACT FROM AUTHOR]

China's interaction with the international financial system is driven by its growing economic importance in the world. However, China's financial influence has been much under-presented compared with its economic power. This mismatch provides an opportunity for China to promote greater inclusiveness and better balance of power in global financial governance. The accelerated financial opening-up, exchange-rate flexibility, and deepened domestic reform also nourished the ambition of internationalization of the renminbi that would have impact on the global reserve currency system. This paper investigates the motivations behind China's engagements with the international financial system, the approaches China adopted to achieve its goals, and the key domestic policies required for China to gain more weight in the global financial market. [ABSTRACT FROM AUTHOR]

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China has been promoting the internationalisation of the RMB for two decades. As a result, its offshore foreign exchange market has been substantially revitalised, despite that China's capital market remains partially open. The movements of offshore exchange rates can provide crucial clues to understanding the offshore market structure and the effects of interventions by Chinese monetary authorities. Using the GARCH-MIDAS model, this paper examines how the degree of openness and economic fundamentals – both observed and unobserved – affect the long-term volatility of offshore exchange rates. We find that, first, trade openness attenuates the long-term volatility, while financial openness has no effect. Specifically, the use of bilateral currency swap agreements and the relaxation of capital control are associated with lower volatility, while stock market connect programs tend to increase the volatility. Second, observed fundamentals, including relative measures for growth, interest rate, and money supply, have significant negative effects on offshore volatility. Third, although economic policy uncertainty and market risk affect long-term volatility, liquidity does not appear to be a culprit of volatility. In terms of FX interventions, direct intervention decreases the volatility, while oral intervention increases volatility. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to investigate asymmetric long-run effects of bilateral exchange rate on US trade imbalances with China and to examine if the effects are the same under China's fixed and managed floating exchange rate systems. Design/methodology/approach: The authors estimate both linear autoregressive distributed lag (ARDL) model assuming symmetric effect and nonlinear ARDL model assuming asymmetric effect of exchange rate on US trade deficit with China. The authors use data from 1994Q1 to 2005Q2 (under Chinese fixed exchange rate system), from 2005Q3 to 2021Q3 (under Chinese managed floating exchange rate regime), and from 1994Q1 to 2021Q3 (overall data). Findings: The Chow test indicates 2005Q3 is a structure break point. Further, the results suggest the effects of bilateral exchange rate on US trade deficit with China are not the same under different exchange rate systems. The asymmetric long-run effect of bilateral exchange rate does exist. The results also demonstrate the depreciation of Chinese currency will not significantly affect US trade imbalances with China. Research limitations/implications: Based on the results, the Chinese Government should embrace a more transparent and flexible exchange rate system. It will not significantly hurt Chinese trade balance, but it will help to reduce the tension between the USA and China. Originality/value: All previous literature (except two papers) related to the effect of Chinese exchange rate on US trade deficit with China assume the effect is symmetric, and all (except one) use data under different Chinese exchange rate systems. To the best of the authors' knowledge, this is the first paper that studies the possible asymmetric long-run effect of bilateral exchange rate under different Chinese exchange rate regimes. [ABSTRACT FROM AUTHOR]

Currency boards have had an enduring attraction as a solution to exchange rate and monetary credibility for small open economies, despite few successful examples. In this context, the case of Hong Kong stands out for its longevity; it survived the handover to China, the Asian financial crises in 1997, and the global crises in 2007–8 and 2020. The 1983 currency crisis and the decision to link the exchange rate to the US$ is usually treated as an outcome of local political uncertainty due to the Sino‐British negotiations which set the framework for how Hong Kong would fit with the rest of China after 1997. We present fresh archival evidence from Hong Kong and London to reveal the year‐long debates over Hong Kong's monetary system after a drop in the exchange rate in September 1982 and to demonstrate how most of the protagonists in Hong Kong and London came only reluctantly to accept the idea of re‐pegging the dollar once public expectations had been raised. We also show how the mixture of currency and banking instability affected the terms of the negotiations in 1982 and 1983 and set the framework for the one country, two currencies system that prevails today. [ABSTRACT FROM AUTHOR]

Purpose: The experience of rising trade imbalance between Nigeria and its key trading partners in recent years motivated this study. Previous studies on this issue either ignored bilateral level or assumed that the effect of crude oil price and/or exchange rate changes on trade balance is symmetric. Consequently, this study investigates whether Nigeria's bilateral trade balance with Belgium, China, United Kingdom (UK) and USA is responding symmetrically or asymmetrically to changes in oil price and exchange rate. Design/methodology/approach: The authors used nonlinear autoregressive-distributed lag (NARDL) model that decomposed oil price and exchange rate into partial sum processes of positive and negative changes over the period 1999Q1–2019Q4. Findings: The study finds that the effects of oil price hike and plunge asymmetrically influence Nigeria's trade balance with the UK and USA. Further evidence indicated that oil price plunge exerts greater influence than price hike in all the cases, except the UK in the long run. Furthermore, Nigeria's trade balance responds asymmetrically and significantly to changes in exchange rate with China in the long run and with China and the UK in the short run. Specifically, the depreciation effect is more prominent than appreciation. Originality/value: Significant contributions to the existing literature in Nigeria include the recognition that the effects of oil price and exchange rate changes on trade are asymmetric and the disaggregation of trade into bilateral level to identify country-specific effect. [ABSTRACT FROM AUTHOR]

Exchange rate is an important part of financial markets. Our analysis finds that the fluctuations of exchange rates have several obvious features, such as spikes, thick tails, fluctuation aggregations and asymmetry. Based on this, we build novel GARCH class model by introducing a jumping process to describe the dynamics of their fluctuations. Our empirical results show that the models with jump factors can better characterize the agglomeration and thick tail characteristics of these return fluctuations than the models without jump factors. In particular, the model with double exponential jumps can fully handle and capture the fluctuation characteristics of the returns. Our findings will be useful for individuals and governments to predict exchange rate fluctuations, provide reference for the effective management of exchange rate risk in China, and further improve the financial risk management mechanism. [ABSTRACT FROM AUTHOR]

This article examines macroeconomic effects and transmission mechanisms of Covid-19 in Mongolia, a developing and commodity-exporting economy, by estimating a Bayesian structural vector autoregression on quarterly data. We find strong cross-border spillover effects of Covid-19 passing through changes in commodity markets and the Chinese economy. Our estimates suggest that China's GDP and copper price shocks respectively account for three-fifths and one-fifths of the drop in real GDP in 2020Q1. The recovery observed for 2020Q2-2021Q1 is primarily due to positive external shocks. However, disruptions in credit and labor markets have been sustained in the economy. Two-thirds of the fall in employment in 2021Q1 could be attributed to adverse labor demand shocks. We also reveal novel empirical evidence for the balance sheet channel of the exchange rate, the financial accelerator effects, and an indirect channel of wage shock to consumer price passing through bank credit. [ABSTRACT FROM AUTHOR]

International trade includes trade not just in goods but also in services. Introduction of internet technology has helped to boost trade in services by more than trade in goods. What has been the role of the exchange rate in this journey? While many studies have investigated the link between the exchange rate and trade in goods, only three studies in the literature have assessed the impact of exchange rate changes on trade in services. Two have used data from the U.S., and one from China. We add to this new emerging literature by assessing the symmetric and asymmetric effects of changes in the real effective exchange rate of the Korean won on Korean trade in 10 service categories with the rest of the world. Considering the symmetric (linear) models and asymmetric (nonlinear) models to be complementary, we find short-run effects of imports and exports of almost all 10 service industries. Short-run effects translate into the long run in little over 50% of industries. These findings did not change significantly when we considered real trade in services versus nominal trade. Our findings were industry-specific. [ABSTRACT FROM AUTHOR]

This paper examines how US monetary policy uncertainty (MPU) affects RMB deviations from covered interest parity (CIP) and how this effect is influenced by China's capital controls, the RMB exchange rate regime, and international reserves that constrain the transmitting channel of US MPU shocks. Our findings show that US MPU has a spill-over effect and creates deviations from RMB CIP. Capital controls insulate uncertainty shocks and alleviate the US MPU spill-over effect. There are some evidence that international reserves alleviate and the liberalised RMB exchange rate regime magnifies the spill-over effect. However, their effects become insignificant in the presence of capital controls. Moreover, the US MPU effect on RMB CIP deviations becomes prominent after the 2008 global financial crisis. [ABSTRACT FROM AUTHOR]

This paper examines the Granger causal relationship between capital flows and economic growth in China over the period 1998Q1–2019Q2, allowing for real effective exchange rate (REER) effects. As parameter instability tests indicate structural changes, we use bootstrap rolling window causality tests, which suggest that the causal nexus between capital flows and GDP growth is time-varying. We find that the causal links between foreign direct investments (FDIs) and GDP growth are hardly affected by the REER, whereas the REER plays a more important role in affecting the causal connections between portfolio investments and other investments and GDP growth. Our results suggest that cumulative portfolio inflows and cumulative other investment inflows harm GDP growth, whereas cumulative portfolio outflows and cumulative other investment outflows positively affect GDP growth. [ABSTRACT FROM AUTHOR]

With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Using detailed trade data reported by both the mainland Chinese and Hong Kong's governments, we present evidence that indirect currency carry trade likely takes place via round-trip reimports. We also show that greater state control in terms of more state-owned firms does not reduce such "carry trade by trucks." [ABSTRACT FROM AUTHOR]

The trade war between the US and China affects the fluctuation of RMB exchange rate. We collect news on China–US trade policies and talks from January 2017 to July 2020. Results show that China–US dialogue and tariff imposition have the greatest impact on the percentage of RMB appreciation and depreciation. Additionally, tariff relaxation and increasing enterprise restrictions can cause a sharp appreciation and depreciation. "Policies" events and trade news from the US influence RMB fluctuations the most significantly. Finally, positive events cannot significantly cause RMB appreciation, but negative events can significantly cause RMB devaluation. [ABSTRACT FROM AUTHOR]

This paper investigates the efficacy of currency management as a policy tool to improve trade balance by analyzing the impact of the real exchange rate on the bilateral trade between the United States and China. The paper builds upon the existing literature and empirical analysis is carried out based on the J-curve hypothesis using quarterly data from 2000Q1 to 2021Q4. The vector-auto regression (VAR) model is estimated using China and the United States' trade balance, real exchange rate, and GDP. The impulse response functions provide evidence of the J-curve. A shock in Yuan (CNY)-US dollar real exchange rate leads to initial deterioration but improvement in the trade balance in favor of China over subsequent quarters. The results hold for various sub-periods of analysis, i.e., after the exchange rate was allowed to fluctuate since July 2005. Evidence supports that the policy of managing the real exchange rate might have yielded desired results for China. [ABSTRACT FROM AUTHOR]

It is difficult to accurately measure the air exchange rate (AER) in residential and office buildings during occupation via on-site field measurement. The tracer gas method was widely applied to estimate the AER in these buildings, and human metabolic carbon dioxide (CO2) was often used as a tracer gas in different models. This study introduced three models (the ASHRAE model, the ASHRAE China-specific modified model, and the BMR model), which were proposed to estimate the AER based on exhaled CO2. We verified these models by comparing the exhaled CO2-based AER with AER from field measurements using sulfur hexafluoride (SF6) as a tracer gas. We also analyzed the potential factors that could affect the uniformity of the indoor tracer gas distribution. Our results indicate that the ASHRAE China-specific modified model has the best performance with an average deviation of −6.67% and a maximum deviation of −14.6% with multiple measurement points, a stable personnel activity, and proper Parameter settings in a single room in China. [ABSTRACT FROM AUTHOR]

This paper separates the exchange rate effect of monetary sterilization from the scale effect as a rationale for a modification of the measure of sterilization rate. The Chinese episode for 2002–2012 is characterized by a robust trend both for renminbi to appreciate vis-à-vis the dollar and for net official foreign assets to grow, which relates two of four scenarios that I generally identify for possible sterilization responses to changes in the exchange rate and official net foreign assets. I find that the modified sterilization rate in China exhibits a sort of strong "hawkish bias" in which sterilization is more sensitive to the exchange rate appreciation than to its depreciation, on one hand, and to the growth of net official foreign assets than to its decline, on the other. While there is no econometric evidence for the "hawkish bias" in the long run, the significant evidence exists for the short-run asymmetry of sterilization adjustment to be biased more toward the hawkish side than dovish side. [ABSTRACT FROM AUTHOR]

Because of the outbreak of pandemic COVID-19, the economy and financial markets had a sharp decline. Also, based on the lockdown, we saw that amount of production and trade had decreased. This situation continues, and the effect on trade is still an important concern. In this paper, we investigate whether COVID-19 has an effect on trade by means of the real exchange rate in China-EU27 and China-USA. By using J-curve concept, for each trade partner, we use three models, which are ARDL, NARDL, and Multiplier NARDL, using three different data periods considering COVID-19. The results show that inverted J-Curve is proved with the long-run J-Curve effects for both partners, while COVID-19 makes factors favor J-Curve. Although J-Curve was inverted before the pandemic of COVID-9, during the COVID-19, we recognize the effect of J-Curve, which shows that the effect of real exchange rate on trade of China-EU27 and China-USA seems to favor China. [ABSTRACT FROM AUTHOR]

Central Asian Economies (CAEs) have diverse exchange rate policies. They have recorded higher volatility in the foreign exchange market since inception. High volatility of the transition era has drifted these economies towards partial dollarization. Monetary authorities in CAEs, (already have a challenge of maintaining monetary policy autonomy) have a gigantic task of price stability and stopping the spread of dollarization. This study is directed towards assessing the drivers and the determinants of foreign exchange market pressure in CAEs. The results, based on panel data analysis and the System GMM model, have provided useful insights about the exchange market pressure determinants particularly USD, Euro, Ruble, and Renminbi. The results show that China and Russia exchange market pressure has a negative effect on the exchange market pressure of CAEs. While the dollar index shows a positive impact on the exchange market pressure of CAEs. Overall, the findings imply that China and Russia currency appreciation results in a trade deficit across CAEs. The policy implication suggests that the floating exchange rate regime (inflation targeting regime) is not in favor of CAEs, and they must use managed-float to reduce their trade deficits. [ABSTRACT FROM AUTHOR]

The paper studies the misalignment path of the RMB/US$ exchange rate, focusing on the managed floating period since July 2005 and determining the impact of the central bank's intervention on the RMB/US$ misalignment. We adopt the permanent-and-transitory component decomposition approach developed by Gonzalo and Granger (1995) to estimate the equilibrium RMB/US$ rate and its misalignment within a vector error correction model (VECM). The sample for our study is the quarterly data on the exchange rate and some fundamental variables for the US and China between the 1st quarter of 2000 and the 2nd quarter of 2020. The results show a trend of the RMB/US$ reducing its undervaluation during the sample period, going from 41% to 35%. The government intervention substantially increased the RMB undervaluation, from an average of 5% to 39% without accounting for the weak exogeneity of the intervention, but to 25.8% after accounting for the exogeneity. [ABSTRACT FROM AUTHOR]