RMB Exchange Rate Research Articles

The Long-term Relationship between USD to CNY Exchange rate and China’s Semiconductor: An Empirical Research

As a fast-growing industry, semiconductors have gradually become a necessity in the modern world. In addition to its economic importance, the semiconductor industry is closely linked to national and social security. Modern national security largely depends on the level of science and technology, and the level of science and technology in the semiconductor industry plays a decisive role, so the development of the chip industry determines a country's national security and military status to a large extent. China, now the world's second largest economy, is also aggressively developing its semiconductor industry. Meanwhile, the import and export of the semiconductor industry is largely affected by the exchange rate between China and the United States. In this paper, China's semiconductor index from January 1994 to September 2022 and the USD to RMB exchange rate from January 1994 to present are extracted. The VAR model was applied in the study to evaluate the link between variables, and the ARMA-GARCH model was used to determine and analyze both earning ability and stock volatility throughout these years. The study predicts the future development direction of Chinese semiconductor industry and provides investment recommendations to its stakeholders.

Cost-effectiveness analysis of pembrolizumab plus chemotherapy for patients with recurrent or metastatic cervical cancer in China

Objective To evaluate the cost-effectiveness of adding pembrolizumab to various therapy combinations in patients with recurrent or metastatic cervical cancer from the Chinese perspective. Materials and methods The clinical data for our model was taken from the KEYNOTE-826 trial. The direct costs and utilities were collected from local price databases or previously published literature. A three-state partitioned survival model was designed to simulate the disease process of patients with recurrent or metastatic cervical cancer. All costs were estimated in US dollars, with an annual RMB exchange rate of $1 to 6.45 Yuan in 2021. The willingness to pay threshold (WTP) was set at US$37,663.26/QALY. One-way sensitivity analyses and probabilistic sensitivity analyses were performed to evaluate the influence of variables on the model parameters. Results For patients with a programmed death-ligand 1 combined positive score greater than 1,compared to the chemotherapy group, pembrolizumab plus chemotherapy contributed an incremental 1.12 Quality-adjusted Life Years (QALYs) with an incremental cost of US$71,884.42, resulting in an incremental cost-effectiveness ratio (ICER) of US$64,338.19, which is beyond the willingness-to-pay (WTP) threshold of China. According to sensitivity analyses, the ICERs were most sensitive to the utility of progressive disease and the cost of pembrolizumab. However, those parameters had no significant impact on the model’s outcomes. Conclusions The addition of pembrolizumab to various therapy combinations chemotherapy is exorbitant and may not be cost-effective for patients with recurrent or metastatic cervical cancer in China.

Analyzing a dynamic relation between RMB exchange rate onshore and offshore during the extreme market conditions

Using the offshore and onshore market data of the exchange rate between US dollars and Chinese RMB, we analyze the dynamic dependence relation and volatility spillover effect between RMB exchange rates in the offshore and onshore market with the dynamic conditional correlation multivariate volatility Copula and BEKK models, as well as the linkage between these markets that may occur in the extreme market conditions. We find that the volatility clustering and persistence of the RMB exchange rate in the offshore and onshore markets are significant, and there is a two-way volatility spillover effect between these two markets, highlighting the risk transmission mechanism between the RMB exchange rate in the offshore and onshore markets. There is also a significantly positive time-varying dependence relation between the RMB exchange rate in the offshore and onshore markets, with a gradual the price convergence. These findings suggest that risk contagion should be carefully considered between different RMB exchange rate markets for further promoting the marketization formation mechanism of RMB exchange rate, and provides a reference of investigating the forward premium bias puzzle of the currency markets.

Modeling RMB Exchange Rate Volatility – Application of GARCH Family Models

The exchange rate risk caused by the two-way fluctuation of the RMB exchange rate will bring many effects. The volatility of the foreign exchange market is the most common feature of the financial market. Therefore, the research on the volatility of the RMB exchange rate is of great significance in economic and financial aspects. Through statistical analysis of the RMB exchange rate data, an ARMA model was established to eliminate the auto-correlation of the sequence, and the GARCH family model was combined to fit the data. Comparing different distribution hypotheses, the EGARCH model under the GED distribution determined by the information criterion can match well the financial time series peak and thick tail characteristics. That the RMB exchange rate has agglomeration volatility and leverage effect is also shown, and provides relevant suggestions for preventing RMB exchange rate risks.

RMB Internationalization, FTA and Exchange Rate Pass-Through

Based on the monthly import data classified by HS code from 2008 to 2018, this paper analyzed China’s exchange rate pass-through (ERPT) and the effects of RMB internationalization on it by constructing theoretical model and econometric model. The research shows that the increase of RMB internationalization reduces China’s ERPT and stabilizes import price and reduces the risk of exchange rate fluctuations that our enterprises are exposed to significantly. In the extended analysis, it is found that the signing of Free Trade Agreements further strengthens the impact of RMB internationalization on exchange rate pass-through, means two strategies of RMB internationalization and FTA can promote each other.

A Study of the Impact of Economic Policy Uncertainty in the US and China on the Volatility of the RMB Exchange Rate

This paper examines both theoretically and empirically how RMB exchange rate volatility will be affected by China and US economic policy uncertainty. It finds that RMB exchange rate volatility increases when economic policy uncertainty increases in China and the US; Besides, market uncertainty has a significant positive impact on RMB exchange rate volatility. The findings of this paper can provide useful references for financial regulation and forecasting the role of policy.

Impact of Real Effective Exchange Rate of RMB on China’s Value Adding in Global Value Chains

The global value chain is a production and supply network that crosses national borders and connects businesses, institutions, and individuals from different countries to create value and produce goods and services. China is an important part of the global value chain, and its position in it has gradually improved. There is a close relationship between the global value chain and currency exchange rates. Studying the impact of RMB exchange rate fluctuations on China’s added value of global value chains is of great significance for a deeper understanding of China’s internationalization process and competitiveness in the global value chain. Based on the global value chain in trade, a regression analysis is conducted on the added value of China in the global value chain. The real effective exchange rate of RMB is used as the interpretation variable, and foreign direct investment, gross domestic product, and consumer price index are included as the control variables in the analysis. The results show that the rise of China’s real effective exchange rate significantly influences the added value in the global value chain even in the global financial crisis of 2008 and the appreciation of the exchange rate improves the production efficiency of China’s processing and manufacturing export companies.

On the Repeated Trend of RMB under the Current Epidemic Situation

In 2021, the global epidemic situation will still be dominated by the foreign exchange market trend, and the overseas epidemic situation will continue to spread, forcing the RMB to remain strong. At present, the fluctuation of the RMB exchange rate has fallen back, and it is still strong compared with the US dollar and major US dollar currencies. In the future of 2023, the comparative advantage of China's economy will be very narrow, and China's major balance of payments surplus is expected to gradually decline. As the supply and demand of the foreign exchange market become more balanced, the RMB exchange rate is expected to become more differentiated and the exchange rate fluctuation is expected to increase.

The impact of China's entry into the carbon trading market on European carbon prices

As the world's largest greenhouse gas emission country, the success or failure of the Chinese national carbon emissions trading market will largely determine climate change’s further development. Chinese national carbon market, which was opened on July 16, 2021, will also exert spillover effects on carbon trading markets in other countries, including the European carbon emissions trading market, which will have a more significant impact. This paper uses the double difference model(DID), sets the price of European certification emission reduction(CER) as the dependent variable, and takes China's entering into the carbon emissions trading market and the RMB exchange rate as the independent variable to test the influences of China's entering in the carbon emissions trading market on the European CER price. After that, non-linear machine learning models such as support vector machines are used to fit and predict the price of European CER, which further verifies that the opening of the Chinese national carbon emissions trading market contributes to a decline in European CER price.

Islamic finance in China: Current landscape and future forward

China’s foreign trade has gradually lost its advantage due to continuous rise of RMB exchange rate and the labor costs in recent years. China urgently needs to explore new international trade markets to reinvigorate its foreign trade. With the recent development strategy of “One Belt One Road”, China should seize this opportunity to develop Islamic finance since most countries along the routes are Islamic countries. Islamic finance differs from traditional finance in its principles, development, products, operations, and regulation. The purpose of this article is to examine Chinese views on Islamic finance. The study conducted a survey through questionnaire. The findings show that the most ideal area to develop Islamic finance is in China’s northwest region due to its cultural advantages. The survey records that respondents’ reluctance towards Islamic finance mainly due to the absence of legal system and financial regulations for Islamic finance in China. Moreover, lack of talents in Islamic finance is also a major concern based on the survey. The study believes that the development of Islamic finance is conducive to the sound development of China’s financial system. It strengthens economic and trade cooperation with the Islamic world, enhances the ability to attract investment, and promotes harmonious economic development of ethnic minority areas.

위안화 환율변동과 한국 기업의 환노출

This study estimates the exchange rate exposure of Korea Exchange firms due to changes in the CNY/USD exchange rate and analyzes its characteristics. The value of Korea Exchange firms decreases when the value of CNY decreases (when the CNY/USD exchange rate rises). More importantly, the sample firms are more exposed to CNY/USD exchange rate changes than the firms are exposed to KRW/USD exchange rate changes. The markup adjustment coefficients which were estimated from the relationship between CNY/USD exchange rate changes and USD-based export price changes suggest that firms' exposure to CNY/USD exchange rate changes is associated with export price adjustments of Korean firms due to exchange rate changes. The main results of this study suggest that for Korean firms, foreign exchange rate exposure to the CNY/USD exchange rate is greater than exposure to changes in the KRW/USD exchange rate, implying that Korean firms need to pay more attention to the changes in the RMB exchange rate and the developments of the Chinese market.

Analysis of The Impact between Fluctuations in the Exchange Rate of RMB against The U.S. Dollar and China's Export Business

In this project, when the exchange rate of RMB against the U.S. dollar rises in the trade between China and the United States, due to the decline in the income of export goods, the decline in total export value will lead to a decrease in the number of dollars exchanged by China, and on the contrary, the income from imports will increase, so Imports also increase, causing more dollars to be spent. In this way, after a certain period, the total amount of U.S. dollars held by China will decrease, which will lead to an increase in China's demand for U.S. dollars, which will lead to the appreciation of the U.S. dollar, that is, the exchange rate of the RMB against the U.S. dollar will decline.

Forecasting RMB exchange rate volatility: do time-varying higher moments and time-varying risk aversion help?

ABSTRACT In this paper, we investigate the predictive value of time-varying higher moments and time-varying risk aversion (RA) for the RMB exchange rate volatility. To do so, we develop a threshold GARCH-MIDAS model with skewness and kurtosis (henceforth TGARCH-MIDAS-SK model). Our empirical results indicate the presence of significant reverse leverage effect and time-varying skewness and kurtosis in the RMB exchange rate returns. The RA has a significant negative impact on the RMB exchange rate volatility. Moreover, we observe that incorporating leverage effect, time-varying higher moments and RA improves the in-sample fitting and out-of-sample forecasting performance of the model.

Exchange Rate Appreciations and the Distribution of Productivity: Is Importing Inputs Sustainable for Emerging Countries?

A static model is used to investigate how the exchange rate movement affect the distribution of productivity within an industry. Quantile regression is then used to empirically test the effects of RMB exchange rate appreciation on the distribution of labor productivity within industries. Based on China’s manufacturing micro-enterprise survey data from 1998 to 2007, we characterize how exchange rate changes affect the distribution of productivity through three mechanisms. We find that the exchange rate appreciation increases the dispersion of the productivity distribution and decrease the efficiency of resource allocation and aggregate productivity. The distribution of the import intensity may be the main cause for the increase in the productivity dispersion and the deterioration of the industrial resource allocation efficiency, which implies that foreign inputs improve the mean productivity of firms but decrease the resource allocation efficiency. China should tradeoff the gain in productivity and loss in allocation efficiency when it aims to implement a more elastic RMB exchange rate regime.

Reliability study of stock index forecasting in volatile and trending cities using public sentiment ——based on word2Vec and LSTM models

ABSTRACT Accurate forecasting of the stock market has always been a key concern of academics and investors, and few researchers have discussed the reliability of stock index forecasting in volatile and trending markets based on public sentiment. This article will first use Word2Vec and CNN to classify the sentiment of 754,000 text data excavated from the Oriental Fortune Stock Forum and construct public sentiment indicators; then, select characteristic parameters such as the closing value of the Shanghai Composite Index, the inflow of northbound funds, and the exchange rate of RMB against the US dollar. Introducing sentiment indicators and building an LSTM model to explore the effect of public sentiment factors on the prediction of the Shanghai Composite Index in the unilateral rise, unilateral fall, and volatile markets. The research shows that the reliability of using public sentiment to predict unilateral falling and volatile markets is high, especially the prediction error of predicting volatile markets is the smallest. In addition, it is also found that due to the existence of the ‘disposition effect’, the error is significantly larger when using public sentiment factors to predict the unilateral rising market.

Analysis of RMB Exchange Rate Fluctuations under the Covid-19—Taking the RMB-USD Exchange Rate as an Example

Analysis of RMB Exchange Rate Fluctuations under the Covid-19—Taking the RMB-USD Exchange Rate as an Example

The Exchange Rate of RMB Has Positive Influence to Chinese Stock Prices

After the exchange rate reform on August 11, 2015, the RMB exchange rate has had an increasing impact on my country's stock price. The study of exchange rate changes plays a very important role in stabilizing a country's stock price. This paper first introduces the transmission mechanism of exchange rate to stock prices from three aspects, and then establishes a multiple linear regression equation, using the closing price of the CSI 500 Index and the exchange rate of RMB against the US dollar as the descriptive indicators of the stock price and exchange rate, respectively, and the consumer price Index, producer price index, purchasing manager index, and money supply are used as control variables to empirically test the effect. Finally, the conclusion is drawn that my country's stock price and the RMB exchange rate change in the same direction.

Emerging influence of the RMB on currency markets in a transpiring tri‐polar international monetary system

AbstractThe up‐and‐coming influence of the RMB on currency co‐movements is examined in this paper, in the context of a transpiring tri‐polar international monetary system advocated in prior studies. The study is empirically conducted against the backdrop of a more variable RMB exchange rate regime, which enables the integration of the RMB into the international monetary system. The influence of the RMB is found most evident in Asia, being modest in Latin America while reaching Africa. The RMB co‐moves most with the currencies of countries that have large shares in trade with China considerably. Meanwhile, a residual‐based instrumental variables model is proposed in this study purposely for dealing with issues of common factor dominance, which prevails in currency co‐movements. The emerging influence of the RMB on currency co‐movements arises at the time when a multiple‐reserve currency system is coming, and the RMB is included as the third largest currency in the SDR basket. It is shored up by the improved infrastructure, strengthened central bank cooperation and expanded networks for cross‐border RMB payments and settlements. It is concluded that the RMB has increasingly integrated into the international monetary system as one of the major players, effecting currency market movements actively alongside the US dollar and euro.

What determines the long-term volatility of the offshore RMB exchange rate?

ABSTRACT China has been promoting the internationalisation of the RMB for two decades. As a result, its offshore foreign exchange market has been substantially revitalised, despite that China’s capital market remains partially open. The movements of offshore exchange rates can provide crucial clues to understanding the offshore market structure and the effects of interventions by Chinese monetary authorities. Using the GARCH-MIDAS model, this paper examines how the degree of openness and economic fundamentals – both observed and unobserved – affect the long-term volatility of offshore exchange rates. We find that, first, trade openness attenuates the long-term volatility, while financial openness has no effect. Specifically, the use of bilateral currency swap agreements and the relaxation of capital control are associated with lower volatility, while stock market connect programs tend to increase the volatility. Second, observed fundamentals, including relative measures for growth, interest rate, and money supply, have significant negative effects on offshore volatility. Third, although economic policy uncertainty and market risk affect long-term volatility, liquidity does not appear to be a culprit of volatility. In terms of FX interventions, direct intervention decreases the volatility, while oral intervention increases volatility.

Behavioral Heterogeneity and Excessive Volatility of RMB Exchange Rate

The paper develops a two-type behavioral heterogeneous agent model including fundamentalists and chartists. It examines whether investors’ behavioral heterogeneity is related to the excessive volatility of RMB exchange rate. We use the deviation of the real exchange rate from the fundamental exchange rate as a measure of excessive exchange rate volatility. The fundamental value is calculated by the revised RMB fundamental exchange rate model with cointegration technology. After estimating the behavioral heterogeneous agent model using the monthly RMB exchange rate data from October 2006 to November 2020, we find that the heterogeneity of traders in price and trading strategies can significantly explain excess volatility of the RMB exchange rate. Our analysis of two significant fluctuations in 2015-2016 and 2018-2019 further corroborates our key finding that investors’ behavioral heterogeneity plays an important role in explaining excess volatility of RMB exchange rate.