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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]

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 reveals the inherent characteristics behind the statistical phenomena of exchange rate interactions and co‐movements, corroborated empirically by exploring a range of currencies with varied degrees of flexibility. It then studies purposely the historical evolution and development prospects of the RMB exchange rate regime. The RMB exchange rate behaviour and statistical patterns are contrasted with the freely floating currencies in this context. Taking up alternative policy positions, the expected developments in RMB characteristics are deliberated, projecting a trajectory for further RMB regime reforms. How the RMB would fulfil the significant role on the global currency market as signified by its position in the SDR basket is contemplated, beyond a conventional policy shift and under the paradigm that the global currency market tends to be tri‐polar. [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]

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]

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]

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]

Research background: Most transactions in world trade are invoiced in several international currencies. The changes in the distribution of the great economic powers and the strengthening of the position of developing countries make it necessary to consider the factors determining the choice of trade invoicing currency and to assess the prospects of the dollar as an invoicing currency and the possibility of strengthening the position of developing countries' currencies in this function. Purpose of the article: The aim of the paper is to assess the factors influencing the choice of invoicing currency for international trade in 2000-2019. Methods: The analysis of factors influencing the choice of international trade invoicing currency is based on panel data modelling. The study is conducted for a group of 55 countries. It is assumed that the following variables may influence the currency position in the trade invoicing function: the share of the issuer's country in the bilateral trade, inflation and exchange rate. Findings & value added: The analysis showed that despite the decreasing share of the United States in world trade, the U.S. dollar remains the most important export invoicing currency. The main factors influencing the dollar's dominance are the U.S. share of countries' exports, inflation in developing countries, and the exchange rate in advanced economies. The great significance of trade share as a determinant of the position of the trade invoicing currency is an important indication of the strengthening position of developing country currencies, particularly the Chinese yuan. The obtained results confirm, with the use of more complete data, the validity of the dominant currency paradigm and enrich the still underdeveloped analysis in the area of international macroeconomics using panel data analysis. [ABSTRACT FROM AUTHOR]

This article highlights the increasingly important role of clean energy metals in return and volatility spillovers across energy and foreign exchange markets. During the collapse of oil prices from 2014 to 2016, crude oil futures were at the center of the risk contagion; however, since the COVID‐19 pandemic broke out, the spillovers of clean energy metal futures have become one of the main sources of the risk contagion. Additionally, crude oil and the US dollar are the most important contributors to the spillovers, but further spillovers are emerging between the Chinese yuan, euro, and Japanese yen with clean energy metals. [ABSTRACT FROM AUTHOR]

The scope of this study is to empirically test the renminbi's (RMB) anchor effect. Since the proposal of the Belt and Road (B&R) Initiative, the RMB is shown to have made more remarkable progress as an anchor currency in B&R countries compared to non‐B&R countries. The ordered logit model is then used to examine the determinants of the RMB anchor effect. The results show that the probability of the RMB being an anchor currency increases with the higher the trade integration, the higher the investment dependence, the better the RMB infrastructure and the closer the policy cooperation. The results also provide evidence on how to further strengthen the RMB anchor effect and promote the RMB internationalization in the long run. On the basis of strengthening its policy cooperation with B&R countries, China should use its sustainable growth of trade and investment to provide the impetus for RMB internationalization. Furthermore, it should optimize the layout of the RMB offshore market, increase the openness of the financial market, and strengthen currency cooperation among central banks to provide guarantees for RMB internationalization. [ABSTRACT FROM AUTHOR]

This paper examines the causal relationship between the expectation of exchange rate and the Hong Kong H-share discount relative to China A-shares over the period 2006–2015, during which the Chinese currency transitioned from a pegged regime to a managed floating regime. Results show that the expected appreciation of the Chinese yuan leads to the decline in the H-share discount after controlling for the effect of different market sentiments and several other factors that explain the foreign share discount in the existing literature. Our results remain robust after adopting alternative model specifications. [ABSTRACT FROM AUTHOR]

Empirical evidence on foreign exchange markets in emerging market economies shows changing volatility patterns. Using a univariate Markov regime switching model on daily data between April 2006 and March 2018, this paper identifies the turning points in volatility pattern in BRICS currency markets. The smoothed probability curves identify the phases of volatility during the period. Chinese Yuan is found to be the least volatile across regimes among BRICS currencies, whereas it is the highest for South African Rand. Such lower volatility in Chinese currency follows from higher intervention in the currency market by The People's Bank of China, as is evident from the intervention index. The results have implications for exchange rate policy interventions, volatility transmission in foreign exchange markets and asset portfolio choices of emerging market economies. [ABSTRACT FROM AUTHOR]

Financial bubbles are described as the deviation of the market values of financial assets from their core values. They are one of the main indicators for the financial crises by negatively affecting the markets due to the constant overvaluation of the assets. Therefore, investigating the presence of financial bubbles and determining the reasons are of great importance for investors, market regulators, and portfolio managers in terms of investment risk and price stability. In the study, the presence of bubbles in the foreign exchange market is investigated by considering the most traded currencies such as the US Dollar, Euro, Japanese Yen, British Pound, and Chinese Yuan. For this purpose, the daily price data for the period between 03.01.2005-20.11.2019 for the US Dollar/Turkish Lira, Euro/Turkish Lira, British Pound/Turkish Lira, and Chinese Yuan/Turkish Lira, and the daily price data belonging to 28.08.2013-20.11.2019 period for Japanese Yen/Turkish Lira are used. Supremum Augmented DickeyFuller (SADF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) tests are used to determine the bubbles in aforementioned exchange rates. The results indicate findings regarding the formation of financial bubbles in the foreign exchange market in Turkey. [ABSTRACT FROM AUTHOR]

Most previous research did not find powerful evidence suggesting the depreciation of Chinese yuan had contributed significantly to the trade imbalances between the United States and China. In our current study, we employ quarterly data from 2005Q3 to 2018Q3 and an error correction model to examine the responsiveness of bilateral trade flows between the United States and China to relative prices and the nominal exchange rate under China's managed floating exchange rate regime. To test for a possible structural break due to the financial crisis in 2008, we carry out Chow tests. But the results support no structural break. We find strong evidence that depreciation of Chinese currency yuan encourages U.S. imports from China and discourages U.S. exports to China. In addition, an increase in U.S. income will promote U.S. imports from China significantly, and a higher Chinese income will remarkably encourage U.S. exports to China. Finally, the bilateral trade flows between the United States and China respond differently to the relative prices and nominal exchange rate. [ABSTRACT FROM AUTHOR]

Chinese Yuan Renminbi has been included in IMF Special Drawing Right since the end of 2015. This momentum notified the increasing importance of Renminbi (RMB) as a rising star of international currency. ASEAN plus 3 has responded to RMB internationalization and the Asian financial crisis by the Chiang Mai Initiative of Multilateralization (CMIM). This paper will explore the impact of RMB internationalization on the movement of ASEAN member exchange rates. This research would provide empirical evidence that RMB has already become an important force in impacting the exchange rate of ASEAN currencies. The framework of the empirical model from Frankel and Wei (1994) and Ogawa and Shimizu (2006) are used to answer these questions. This research found that the effects of Renminbi internationalization are significant in explaining ASEAN currency movements, especially after ASEAN China FTA (ACFTA). There is empirical evidence that increasing trade between ASEAN and China could facilitate the increase use of RMB in the ASEAN foreign exchange market. [ABSTRACT FROM AUTHOR]

This paper studies how the major economic events would have affected Chinese yuan's nominal exchange rate against US dollar from 1989 to 2013. The traditional average treatment effect estimation methods cannot be used to consistently estimate yuan's pegged exchange rate. We develop a new estimation strategy by combining a novel panel data method (proposed by Hisao, Ching and Wan) and the purchasing power parity theory. Based on this new estimation strategy, we find that during the period of pegging to US dollar, Chinese yuan were undervalued. Before the 1997 Asian Financial Crisis, the pegged exchange rate regime starting from January 1994 made the yuan undervalued by 2.62%. China's accession to WTO caused yuan undervalued by 36.60%. After the reform of Chinese exchange rate policy in July 2005, the undervaluation of the yuan was reduced to only 0.76%. Yuan was undervalued again by 20.43% because of 2008 China's economy stimulus package. The policy reform in June 2010 made yuan overvalued by 14.40%. We conclude that Chinese fixed exchange rate policy indeed undervalued the yuan, especially after its accession to WTO. The recent reforms of Chinese exchange rate policy made progresses in re‐evaluating the yuan. [ABSTRACT FROM AUTHOR]

The exchange rate is one of the most monitored economic variables reflecting the state of the economy in the long run, while affecting it significantly in the short run. However, prediction of the exchange rate is very complicated. In this contribution, for the purposes of predicting the exchange rate, artificial neural networks are used, which have brought quality and valuable results in a number of research programs. This contribution aims to propose a methodology for considering seasonal fluctuations in equalizing time series by means of artificial neural networks on the example of Euro and Chinese Yuan. For the analysis, data on the exchange rate of these currencies per period longer than 9 years are used (3303 input data in total). Regression by means of neural networks is carried out. There are two network sets generated, of which the second one focuses on the seasonal fluctuations. Before the experiment, it had seemed that there was no reason to include categorical variables in the calculation. The result, however, indicated that additional variables in the form of year, month, day in the month, and day in the week, in which the value was measured, have brought higher accuracy and order in equalizing of the time series. [ABSTRACT FROM AUTHOR]

We propose a triangular purchasing power parity (PPP) analytical framework, which is theoretically justified and empirically validated. The mechanisms and channels through which a seemingly mystery relationship emerges are deliberated and examined, which renders significant implications to international monetary economics, finance and business. The de facto peg of the RMB to the US dollar, together with trade activities and arrangements, causes a triangular PPP effect that the dollar euro exchange rate is not a function of the relative prices in the US and Euroland. Instead, it becomes a function of the relative prices in the People's Republic of China (PRC) and Euroland. The results are supportive of triangular PPP in a three‐economy world of the US, Euroland and PRC. [ABSTRACT FROM AUTHOR]

Abstract: We introduce a gravity model to the currency choice for cross‐border trade settlement and the Heckman selection model to estimate the impact of the exchange rate on the cross‐border trade settlement of the Renminbi (RMB). We analyse bilateral exchange rates using panel data of China and 182 RMB settlement countries, or areas, from 2009 to 2014. We find that, regardless the choice stage or scale stage of RMB cross‐border trade settlement, the appreciation of the RMB does not necessarily promote RMB cross‐border trade settlement. This result holds when we take geographic differences into account and split the settlement of cross‐border trade into merchandise and service trade. We further investigate the channels through which exchange rate influences the cross‐border trade settlement of RMB, and we find that the appreciation of RMB impedes enterprises from choosing RMB as their settlement currency by reducing the scale of export to RMB settlement areas, whereas it speeds up RMB cross‐border trade settlement by increasing the scale of China's import from RMB settlement areas. We find that China's economic strength supports the development of RMB cross‐border trade settlement. However, the geographical distance between China and the RMB settlement areas may inhibit cross‐border trade settlement in RMB. [ABSTRACT FROM AUTHOR]

This article investigates the effects of China’s exchange-rate regime reform on trade between China and the eurozone. Both the exchange rate between the euro (EUR) and the renminbi (RMB) and exchange-rate volatility are included in the autoregressive distributed lag (ARDL) model, and our empirical work also considers the third-country effect. Our findings show that, during the reform period, China’s exports to the eurozone are affected only by the EUR–RMB exchange rate per se and not by its volatility. However, neither the exchange rate nor its volatility significantly influences the eurozone’s exports to China during the reform period. Such asymmetry might be attributed to the discrepancy between Chinese exporters and their eurozone counterparts in the knowledge and ability to manage exchange-rate risk. [ABSTRACT FROM PUBLISHER]

In this paper, we provide an analysis of various interest groups in trying to affect the exchange rate determination and the direction of exchange rate policies in China. Given that the People's Bank of China is not an independent central bank, additional actors such as the Ministry of Commerce (MOFCOM), Ministry of Finance (MOF), the National Development and Reform Commission (NDRC), the State-Owned Assets Supervision and Administration Commission (SASAC) all have incentives to influence the Politburo Standing Committee (PBSC) as well as the relevant Leading Small Groups (LSGs). To enrich the discussions on the political and institutional aspects of the yuan, we also provide an economic lobbying model incorporating imperfectly competitive tradable sectors to shed light on our unique case of Chinese currency determination and exchange rate policy in the presence of these interest groups. [ABSTRACT FROM AUTHOR]

With China’s economic rise and in particular its massive international trade surplus with the rest of the world, the exchange rate of its currency has come under increasing scrutiny in the new millennium. Based on a critical review of existing International Political Economy (IPE) theoretical approaches on exchange rate politics – theInnenpolitikapproaches and the international-domestic interaction approach – this paper argues that two-level game theory is a suitable tool for explaining the development of China’s exchange rate policy. By specifically examining the external factors and domestic sources of China’s exchange rate policy, this paper develops a complete analytical framework in which China’s central decision makers are understood to strive to reconcile international pressures and domestic bargainers when making decisions on exchange rate policy. After offering a theoretical review, revision and synthesis, the paper provides an empirical study of China’s 2005 exchange rate reform to specifically show how international factors played an agenda-setting role in China’s exchange rate policy making and how China’s domestic politics determined the pathway of the exchange rate reform in July 2005. [ABSTRACT FROM PUBLISHER]

This paper examines the policy challenges and dilemmas faced by China's authorities in balancing exchange rate stability with the policy necessity of monetary autonomy. China will have to move toward greater exchange rate flexibility, particularly as the capital account becomes increasingly liberalized and the government pushes forward with RMB internationalization. [ABSTRACT FROM AUTHOR]

A policy debate on widespread currency manipulation has generated economic analyses to inform policymakers regarding both the extent and impact of the problem. Such analyses typically focus on commodity trade and price impacts while ignoring potentially important supply chain linkages. Using Chinese exchange rate policy and global soybean and soybean product markets as an example, this paper illustrates that substantial measurement errors are possible if supply chain linkages are ignored in exchange rate policy analyses. As a consequence, policy responses to foreign currency manipulation informed by such analyses may be misguided or imprecise at best. [ABSTRACT FROM AUTHOR]

This article analyses the persistence of the exchange rates of the Chinese yuan against the US dollar in the NDF market during 1999-2012 with fractional integration technique. It concludes that the exchange rates are I( d) with d close to 1 though statistically significantly below 1, suggesting a small degree of mean reverting behaviour. And the squared returns display long memory with an order of integration of about 0.2. Moreover, the unit root null hypothesis cannot be rejected during the years during 2006-2011 when the international financial crisis broke out and the exchange rate regime reform implemented. At last, we notice that d in the original series is highly negatively correlated with respect to the mean and the variance in the exchange rates, while it is positively correlated with them in the squared returns. And policy implications are also suggested. [ABSTRACT FROM AUTHOR]

Did the exchange rate (ER) regime change that was announced by the Chinese government in 2005 lead to an increased sensitivity of Chinese multinational companies (MNCs) to ER fluctuations? To answer this question our article considers the effect of ER level, volatility and expectation on the Chinese outward foreign direct investment (OFDI) activities in 119 countries for a period of 2003–2013. We find striking evidence that Chinese Renminbi appreciation has a negative impact on Chinese outward FDI flows, and both higher ER volatility and expected depreciation encourage Chinese outward FDI flows. We introduce two complementary effects that explain these findings:repatriation effectandmercantilist effect. In view of the recent debate about the growing importance of Chinese Renminbi in the international transactions we believe that our research results shed light on the possible impact of ER policies on Chinese MNCs behaviour and global FDI distribution. [ABSTRACT FROM AUTHOR]