Interrelation Analysis of the RMB Spot and Offshore Markets

Author

Sun, Dong ; Niu, Dongxiu

Author_Institution

Bus. & Adm. Sch., North China Electr. Power Univ., Beijing, China

fYear

2009

fDate

20-22 Sept. 2009

Firstpage

1

Lastpage

4

Abstract

In this article we analyzed the interrelation between the spot and offshore forward( NDF) markets using RMB-USD on daily basis. This paper focuses on the impact of the reform in the Chinese exchange rate systems, which occurred in July 2007. By means of using cointegration techniques, we find that the RMB spot rate and NDF price have a long stable relationship and Granger causality testing proved that RMB spot exchange rate and NDF prices are influenced deeply each other. Based on VEC model and variance decomposition of RMB spot rate and NDF price, we can get a result that the RMB spot market is the leading market and has a significant impact on NDF offshore market. This means that because of capital control, it is still possible for governments to pursue independent economic policies even in the presence of influence from the offshore market that it has no control over.

Keywords

econometrics; economic indicators; exchange rates; statistical testing; Chinese exchange rate system; Granger causality testing; NDF price; RMB spot exchange rate; USD; VEC model; capital control; cointegration technique; independent economic policy; interrelation analysis; long stable relationship; offshore forward market; uncovered interest rate parity; variance decomposition; Econometrics; Economic forecasting; Economic indicators; Error correction; Exchange rates; Finance; Forward contracts; Government; Power generation economics; Testing;

fLanguage

English

Publisher

ieee

Conference_Titel

Management and Service Science, 2009. MASS '09. International Conference on

Conference_Location

Wuhan

Print_ISBN

978-1-4244-4638-4

Electronic_ISBN

978-1-4244-4639-1

Type

conf

DOI

10.1109/ICMSS.2009.5303070

Filename

5303070