Abstract
<p>The purpose of the study was to determine the impact of the Chinese financial market, which is a new market, on the exchange rates of commodity currencies and, thus, the prices of raw materials. For this purpose, an autoregressive distributed lag model (ARDL) was used. The results indicate that the Chinese stock market and futures market for the yuan (the Chinese Yuan Non-Deliverable Forward Transactions; CNY NDF market) had a significant impact on commodity currencies before the global financial crisis in 2008/09, then the effect widened to include more commodity currencies in the post-crisis period. Further evidence suggests that the CNY NDF market had a greater impact on commodity currencies than the Chinese stock market. Despite the significant position of the Chinese economy, research also indicates that the impact of Chinese financial markets on commodity currencies (raw material prices) is weaker than the impact of the US stock market and US dollar market.</p>
Highlights
Driven by rapid economic growth, the Chinese economy’s demand for raw materials and industrial goods has been growing dynamically over the past two decades
The results indicate that the Chinese Yuan Non-Deliverable Forward Transactions (CNY NDF) rate has become an important factor that may be the reason for fluctuations in the prices of some commodity currencies
A 1% increase in the Chinese yuan (CNY) NDF rate leads to an appreciation of commodity currencies in the range 0.18% to 0.68%
Summary
Driven by rapid economic growth, the Chinese economy’s demand for raw materials and industrial goods has been growing dynamically over the past two decades. For this reason, China is playing an increasingly important role in determining global prices for raw materials and commodities. Considering the relatively short period of expansion of the Chinese economy, the Chinese markets (financial, including currency, and commodity and raw materials) can be considered as representatives of the category of new markets. This category includes the financial markets of other countries of growing importance in the international arena, such as South Korea and India.
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