 The impact of RMB’s SDR inclusion on price discovery in onshore-offshore marketsYu-Lun Chen and Ke Xu () Journal of Banking & Finance, 2021, vol. 127, issue C Abstract: In this study, we leverage various price discovery measurements to investigate whether and how the addition of the Chinese yuan in Special Drawing Right (SDR) affected price discovery in onshore (USD/CNY) and offshore (USD/CNH) markets. The results show that the less regulated offshore exchange rates contribute more to price discovery than the onshore rates do. Including the yuan in SDR does not change the relative price discovery contributions of the onshore and offshore markets, and more importantly, it enhances the overall price efficiency in both markets, due to lower autocorrelations in the error correction term and fewer arbitrage opportunities. In particular, the price spreads between the onshore and offshore markets decrease, implying that arbitrage opportunities have diminished, as market integration has increased, following the inclusion of the yuan in SDR. Keywords: Special drawing right; RMB internationalization; Fractional cointegration; Price discovery; Pricing error; Variance ratio (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:127:y:2021:i:c:s0378426621000820 DOI: 10.1016/j.jbankfin.2021.106124 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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