Renminbi central parity : An empirical investigation

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Original languageEnglish
Pages (from-to)164-183
Journal / PublicationPacific Economic Review
Volume23
Issue number2
Early online date3 May 2018
Publication statusPublished - May 2018

Abstract

On 11 August 2015, China revamped its procedure for setting the official central parity of the renminbi (RMB) against the US dollar. Our empirical investigation suggests that the intertemporal dynamics of China's central parity shifted after this policy change, although the deviation of the RMB offshore rate from the central parity and the US dollar index remained the two significant determinants of central parity after the policy change. In contrast, the VIX index only offered explanatory power up to August 2015. Thereafter, the onshore RMB rate and the difference between the 1-month offshore and onshore RMB forward points have significant impacts on the central parity. While the US dollar index effect remains, we find no evidence of a rate-fixing role for the RMB exchange rate against the currency basket announced by China in December 2015.

Citation Format(s)

Renminbi central parity : An empirical investigation. / Cheung, Yin-Wong; Hui, Cho-Hoi; Tsang, Andrew.

In: Pacific Economic Review, Vol. 23, No. 2, 05.2018, p. 164-183.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review