What Drives Growing Currency Co-Movements with the Renminbi?

29 Pages Posted: 13 Apr 2020

See all articles by Bokyeong Park

Bokyeong Park

Kyung-Hee University - Graduate School of Pan-Pacific Studies

Jiyoun An

Kyung Hee University

Date Written: March 30, 2020

Abstract

China’s increasing trade volume and continuous integration with global financial markets have strengthened the influences of the renminbi on the exchange rates of different currencies. Previous studies find closer co-movements between the renminbi and other currencies. This paper is novel to investigate the underlying determinants of the comovement further, using panel data of over thirty-four countries. Our results show that stronger bilateral trade and financial linkages with China have a positive association with the currency co-movement. Moreover, countries with greater flexibility in exchange rate regimes show stronger co-movements. These findings imply that growing co-movements are the consequence of autonomous decisions at the market rather than that of management by governments or central banks.

Keywords: Currency Co-movements, Renminbi, Trade Linkage, Financial Linkage, Exchange Rate Regime

JEL Classification: F31, F33, F36

Suggested Citation

Park, Bokyeong and An, Jiyoun, What Drives Growing Currency Co-Movements with the Renminbi? (March 30, 2020). East Asian Economic Review, Vol. 24, No. 1 (March 2020) , Available at SSRN: https://ssrn.com/abstract=3574495 or http://dx.doi.org/10.2139/ssrn.3574495

Bokyeong Park (Contact Author)

Kyung-Hee University - Graduate School of Pan-Pacific Studies ( email )

1 Seochun-ri
Kiheung-eup Yongin-si
Kyunggi-do, 449-701
Korea

Jiyoun An

Kyung Hee University ( email )

1732 Deogyeong-daero
Giheung-gu
Yongin-si, Gyeonggi-do, Gyeonggi-Do 446-701
Korea, Republic of (South Korea)

HOME PAGE: http://kic.khu.ac.kr/

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