Did Donald Trump's tweets on Sino–U.S. Trade affect the offshore RMB exchange rate?

Abstract

This study examines how Donald Trump's tweets regarding Sino-U.S. trade affect the offshore RMB exchange rate through the volatility channel and the fundamental factors channel. The tweets are categorized into “positive” and “nonpositive”, and GARCH(1,1)-in-mean model and OLS model with heteroscedasticity- and autocorrelation-consistent (HAC) standard errors are employed. Results indicate that nonpositive tweets impacted the volatility of offshore RMB exchange rates, but had no effect through the volatility channel. Positive and nonpositive tweets both significantly affected the offshore RMB exchange rate through the fundamental factors channel.