The influence of China's exchange rate market on the Belt and Road trade market: Based on temporal two-layer networks

This study is based on the correlation between China's exchange rate and Shanghai A-share stock price index, and explores its leading backward relationship. The research period is from October 1996 to December 2016. We use wavelet analysis as the research method. Empirical studies show that there is a significant correlation between China's exchange rate and the Shanghai A-share stock price index. Except for the correlation between 2000-2004 before the exchange rate was loosened, there was a significant linkage in the later period.In the high-frequency (short-term 1-4 years), China's short-term exchange rate has a constant positive correlation with the Shanghai A-share stock price index. In the low frequency (long-term 4-8 years), after we added the control variables( interest rate), the lead-lag relationship between the exchange rate and the Shanghai A-share stock price index was affected by the 2008 financial crisis, and the structural change of the stock market did affect its leading-back relationship. JEL classification: F31, G01, G12

This paper investigates the evolution of China's exchange rate regime after the announced shift to a managed floating exchange rate regime with reference to a basket of currencies in July 2005. We find that the RMB basket is essentially a one currency basket of the US dollar. In view of this finding and that the exchange rate of RMB against the US dollar has been crawling upward in an on–and–off manner and at a slow yet erratic rate after the regime shift, China's current exchange rate regime can best be characterised as a discretionary crawling peg to the US dollar. We suggest that a discretionary crawling peg to the US dollar is the optimal and logical choice for China and it will probably be quite some time before China moves to a freely floating exchange rate regime or only to a managed floating exchange rate regime in the real sense.

In the process of China's foreign exchange reform, the so-called swap market was a key element. Despite the problems it caused, notably those associated with a dual exchange rate, the paper argues that the swap market proved to be a useful transition mechanism for China's foreign exchange liberalization. It is shown that the swap market caused exchange controls to wither and introduced market forces into incentive structure. Furthermore, statistical evidence has been found that the Chinese official exchange rate and the swap rate are cointegrated and there existed long-and short-run causal relationship in the sense of Granger in the direction from the swap to the official rate. It is evident from these findings that the swap market facilitated the reform of the mechanism of China's exchange rate by its services of information extraction and of introducing market forces into China's exchange rate decisions.

PurposeThe purpose of this paper is to discuss the change in China's exchange rate regime during the 2001‐2009 period, when both the pegged and floating exchange rates were adopted in the country, offering a rare opportunity to address the issue. The effects of China's interest rate differential (IRD) and unemployment rate on the exchange rate are also discussed in this paper.Design/methodology/approachGiven the economic variables are non‐stationary, this paper adopts cointegration analysis to evaluate the long‐term equilibrium in China's economy, with the unit root test, cointegrating test and a vector error correction model also used to scrutinize China' exchange rate regime for different time periods.FindingsThe time series data – including the exchange rate, IRD and unemployment rate – are used in the unit root test and Johansen test to verify the long‐term equilibrium between real exchange rate and unemployment rate in specific periods of time. Since the findings indicate no correlation between the exchange rate and IRD, it is possible to predict the value of Chinese yuan based on China's unemployment rate, but not IRD. China's government slows down the appreciation of its currency when the lagged unemployment rate is high.Originality/valueThe paper provides a fresh perspective on the long‐term equilibrium among China's exchange rate, IRD and unemployment by dividing the sample period into several parts, according to the exchange rate policy. The findings indicate that the unemployment rate plays an important role in China's exchange rate regime.

This studies objective is to look at China's abnormal return in the event of a tariff war between the US and China. Data categories that are quantitative, or that can be expressed as numbers or ratos, are used in this study and uses utilizes auxiliary data sources in the form of historical data from all countries recorded on the data.worldbank.org website. The kind of data used is annual data series and will be adjusted to the factors affected by the tariff war between America and China. The VAR Analysis Model through the ADF Unit Root Test using the variables GDP, Tariff (TAX), and Exchange Rate (REX) in China from 1990 to 2021 is one of the data analysis strategies utilized in this study. We found that China's GDP is significantly positively to the Chinese exchange rate. Both China's own exchange rate and its tariffs are significantly influenced favorably by China's exchange rate. The tariffs applied by China have a significant negative correlation, which means that the increase in China's tariffs injures China's own economy. However, the rate at which the Chinese currency is exchanged and tariffs in China are significantly positively correlated. The trade war with the USA is not only bad for the global economy but also bad for the Chinese economy. And likely get a detrimental effect into the US economy.

Some developing countries economists have already said that a country's exchange rate arrangement should be adapted with its industrial structure, but these economists were not give a unambiguous interpretation for the exchange rate arrangement how to adapt the industrial structure. For a long time, china's exchange rate arrangement met a dilemma between efficiency and stability. In This text, beginning from industrial structure and leading industry analysis, then, making a conclusion that in developed countries, developing countries export product is competitive and in developing countries, developed countries export product is monopolistic. So, china should choose not-free-floated exchange rate arrangement, and this is a long-term strategy.

China's RMB exchange rate system has gone through four stages: dual exchange rate system, pegged exchange rate system, exchange rate floating system, and perfecting the mid-price quotation mechanism, which has already made individual achievements. However, China's exchange rate system still has many problems, such as the failure of exchange rate prices to fully reflect market supply and demand levels, as well as much government intervention. In the future, we should continue to improve the market maker system and promote the market-oriented reform of the RMB exchange rate system.

This paper estimates the effect of China's exchange rate changes on exports of developing countries in third markets. The degree of competition between China and its developing country competitors in specific products and destinations plays a key role in the identification strategy. The strategy exploits variation across exporters, importers, products and time—afforded both by disaggregated trade data and bilateral exchange rates—to estimate this “competitor country effect.” There is robust evidence of a statistically and quantitatively significant effect. A 10 percent appreciation of China's real exchange rate boosts a developing country's exports at the product level on average by about 1.5–2.5 percent. (JEL F14, F31, F33, O19, O24, P33)

This paper estimates the impact of China's exchange rate changes on exports of competitor countries in third markets, which we call the We use recent theory to develop an identification strategy in which competition between China and its developing country competitors in specific products and destinations plays a key role. We exploit the variation - afforded by disaggregated trade data - across exporters, importers, product, and time to estimate this spillover effect. We find robust evidence of a statistically and quantitatively significant spillover effect. Our estimates suggest that a 10 percent appreciation of China's real exchange rate boosts on average a developing country's exports of a typical 4-digit HS product category to third markets by about 1.5-2 percent. The magnitude of the spillover effect varies systematically with product characteristics as implied by theory.

Based on the data from January 2009 to December 2019, this paper studies the influence of exchange rate communication on China's foreign exchange market with EGARCH model. Through the analysis of variables such as exchange rate communication, actual intervention, macroeconomic data, we can conclude that as an effective management tool, exchange rate communication plays an important role in intervening China's exchange rate changes.

The paper argues that exchange rate reform is a vital supply-side factor in China's export growth. It contributes to China's export expansion by affording a realistic exchange rate and allowing freer access to foreign exchange, thereby leading to the reduction of anti-export bias and strong supply response. In an imperfect substitutes model, China's long-run export supply and demand functions are estimated in a system context. Evidence is found that the exchange rate reform is one of the most influential factors in China's long-run export expansion, inducing significant response of exports supply. In the short-run, the exchange rate reform and the export volume are also cross-linked through the error-correction process. China's exchange rate policy adjusts speedily to ensure the long-run equilibrium of the supply-side relationship and is likely to have played a dominant role in the adjustment. The study confirms, thanks to the exchange rate reform, China's exchange rate policy has benefited China's remarkable growth of exports before 1994.

This paper explores the effect of China's exchange rate fluctuations on changes in money stock and exports of nine Asian and two African economies along the 21st Century Maritime Silk Road and a major trade partner, U.S. A simple DSGE representation is envisaged to include two rational expectations components and an inflation targeting mechanism. Initial GMM calibration set for simulations is obtained from panel data 1990 to 2015. The Judd-Gaspar test result indicates the model is accurate. Findings indicate the same set of optimal parameter estimates is applicable for India, Singapore, Vietnam, Philippines, Thailand, Malaysia, Bangladesh, Pakistan, Kenya, Tanzania and China. Indonesia and the U.S. have their own sets of estimates. Appreciation in China's exchange rate tends to expand variations in Indonesia's first differenced exports with significant magnitude, but reduces variations in exports of Vietnam, Malaysia, and Kenya by a minor magnitude. Keywords China's exchange Rate, Asian Economies, 21th Century Maritime Silk Road.

In the first half of 2014, China's exchange rate has depreciated a lot. According to China's exchange rate data this article analyzes the reasons for the depreciation as well as the impact of it. Government forces and Chinese economic situation are both considered to be closely related to the weakening in exchange rate. In contrast little support is found for a long-term trend to depreciate because China's balance of payments continued to expand and post a twin surplus. Index Terms - Exchange rate, RMB, Depreciation.

INTRODUCTION The value of China's currency, the renminbi (RMB), and the conduct of China's exchange rate policy have generated intense debate in academic and international policy circles. The RMB was pegged from 1994 until mid-2005 at 8.28 yuan to the US dollar. China shifted in 2005 to a policy of loosely pegging the RMB to a basket of major currencies. Since then, the RMB has appreciated against the dollar, and the current RMB/dollar exchange rate stands at roughly 6:30. Over the same period, RMB generally depreciated against the Euro, falling from 10.06 in June 2005 to 10.79 in June 2008. With the 2007/2008 financial crisis, however, the Euro has depreciated and the RMB/Euro exchange rate presently stands at 8.99. Throughout this period, China has intervened actively in foreign exchange markets to prevent the RMB from appreciating faster by selling RMB and buying other major currencies (mostly US dollars). A number of economic commentators argue that China's policies amount to market-distorting manipulation. For example, C. Fred Bergsten of the Peterson Institute for International Economics recently suggested that the RMB must appreciate by approximately 40 per cent against the dollar to correct current and urged the United States to take multilateral, and if necessary unilateral action, to pressure China to change its ways. (1) Michael Mussa and Arvind Subramanian have expressed similar views. (2) Politicians have become involved. Trade officials from both the US and Europe have argued that Chinese practices unfairly distort trade, amounting to the equivalent of a subsidy to exports and a tariff on imports that would violate World Trade Organization (WTO) rules if imposed directly. US President Barack Obama stated in November 2009, for example, that China's current trade surplus is directly related to its manipulation of its currency's value. He concurrently promised to use all diplomatic means at his disposal to achieve change in China's manipulation of the value of its currency, a practice that contributes to massive global imbalances and provides Chinese companies with an unfair competitive advantage. (3) During the 2012 US elections season, Mr. Mitt Romney, one of the two presidential candidates, promised--while bashing President Obama, his opponent, of failing to act against China's currency manipulation--that if he was to be elected, he would label China a currency manipulator from day one. (4) Over the past few years, various proposals for action against China have been put forward in the US Congress. These range from insisting that the Treasury Department refer the matter to the International Monetary Fund (IMF), to requiring that the US Trade Representative bring a formal complaint to the WTO, treating China's alleged manipulation as a source of dumping or countervailable subsidies that would permit the imposition of antidumping or countervailing duties on Chinese imports. IMF case studies have shown that the IMF has never identified a certain member engaging in exchange manipulation, or indicated that the acts of any of its members amount to foreign exchange manipulation. Theoretically, the RMB exchange rate issue can become the subject matter of WTO dispute settlement proceedings only when China's trade partner(s) (e.g., the US and/or the European Union) lodge a complaint against China in the WTO dispute settlement body. Before moving to an action in the WTO, the governments of China's trade partners must take into consideration the translation of China's exchange rate policies (and specifically the magnitude of its exchange rate misalignment) into equivalent real trade policies that could then be more readily evaluated under the rules of the WTO, e.g., under Article XV of the General Agreement on Tariffs and Trade (GATT) 1994, Article XXIII of the GATT or Article 3 of the Agreement on Subsidies and Countervailing Measures (SCM). …

Purpose - The purpose of this paper was to analyze the Chinese government's announcement of the RMB's appreciation on July 1, 2010, and its aim was to ascertain whether the appreciation has affected Chinese export prices by empirically measuring the degree of the exchange rate pass-tough on those prices. Research design, data, and methodology - Using 73 HS trade categories with cross-industry and time-series data, the panel estimation of a fixed-effects model has been applied to measure the degree and stability of any exchange rate pass-through effects. The estimation results show that the export prices of most trade categories were affected by the exchange rate changes. The pass-through effect was generally small, at about -0.485, and statistically significant in most export prices. Results - The empirical results indicate that China would lose its advantage and competitiveness in export if the RMB were appreciated continuously and rapidly because its export goods would no longer operate under strong monopolistic competition. Conclusions - The implications for China's exchange rate policy suggest that it would be better for the RMB to appreciate slowly and gradually rather than radically. It is clear that it would be allow the capital free flow in Chinese overall economic interest to reduce the continuous appreciation pressure on the currency and pave the way for improvements in export distribution competitiveness.