Crisis, Capital Controls and Covered Interest Parity: Evidence from China in Transformation

Jinzhao Chen

PSE Working Papers from HAL

Abstract: This paper aims to investigate the intensity and the effectiveness of the capital controls in China from 2003 to 2010, with special attention to the period of financial turbulence that erupted in the summer of 2007. We employ a two-regime threshold autoregressive model to study the Renminbi yield differential between the onshore interest rate and its non-deliverable forward (NDF)-implied offshore interest rate. We find that the de facto intensity of capital controls measured by the threshold increases over time, even during the period of financial turbulence. Moreover, a slightly lower speed of adjustment to the threshold implies that the capital controls are effective in this context.

Keywords: Covered Interest Parity; Capital Control; China; Threshold Autoregressive model; GARCH effect; Financial Crisis; Contrôle de capitaux; Parité de taux d'intérêt couvert; Chine; Modèles autorégressifs à transition brutale; Effet GARCH; Crise financière (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-ifn and nep-tra
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00660654v1
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Crisis, capital controls, and covered interest parity: Evidence from China in transformation (2013)
Working Paper: Crisis, capital controls, and covered interest parity: Evidence from China in transformation (2013)
Book: The Evolving Role of China in the Global Economy (2012)
Working Paper: Crisis, Capital Controls and Covered Interest Parity: Evidence from China in Transformation (2012)
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