Recent RMB Policy and Currency Co-Movements
27 Pages Posted: 14 Jun 2018
Date Written: June 11, 2018
This study investigates how variation in the determinants of the renminbi's daily fixing since the August 2015 exchange rate reform maps on to variation in the co- movement of the renminbi with regional and other emerging market currencies. We first identify three post-reform periods of RMB management: transition, basket management and countercyclical management. The co-movement with regional and Latin American currencies peaked in the basket period, when the daily fixing was most predictable and multilateral. By contrast, the decline in co-movement in the countercyclical management period between May and July 2017 leaves it premature to speak of a renminbi zone. The dependence of the co-movements on renminbi management has important implications for renminbi internationalisation.
Keywords: exchange-rate determination; renminbi (CNY) policy, renminbi zone, spillovers, renminbi internationalisation
JEL Classification: F31, F33
Suggested Citation: Suggested Citation