Deviations from covered interest parity : The case of China

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)12_Chapter in an edited book (Author)Not applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Title of host publicationThe Evolving Role of Asia in Global Finance
PublisherEmerald Group Publishing Ltd.
Pages369-386
Volume9
ISBN (Print)9780857247452
StatePublished - 2011
Externally publishedYes

Publication series

NameFrontiers of Economics and Globalization
Volume9
ISSN (Print)1574-8715

Abstract

We study the empirical determinants of the Chinese renminbi (RMB) covered interest differential. The canonical macroeconomic variables including capital flight and the factors that affect country risk, and a few China-specific regulatory and institutional factors are considered. It is found that the effects of these canonical macroeconomic variables on the RMB covered interest differential are largely consistent with those reported in the literature. Further, the covered interest differential was affected by China's general capital control policy and its exchange rate reform program, but not its political risk index. The effects of these explanatory variables on the covered interest differential appear to work mainly via the forward premium rather than the interest rate differential component. The results are largely the same across the onshore and offshore RMB forward rates that cover different sample periods. © 2011 by Emerald Group Publishing Limited.

Research Area(s)

  • Covered interest differential, Expected depreciation, Forward premium, Macrodeterminants

Citation Format(s)

Deviations from covered interest parity : The case of China. / Cheung, Yin-Wong; Qian, Xingwang.

The Evolving Role of Asia in Global Finance. Vol. 9 Emerald Group Publishing Ltd., 2011. p. 369-386 (Frontiers of Economics and Globalization; Vol. 9).

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)12_Chapter in an edited book (Author)Not applicablepeer-review