Cross-correlations between RMB exchange rate and international commodity markets

Xinsheng Lu, Jianfeng Li, Ying Zhou and Yubo Qian

Physica A: Statistical Mechanics and its Applications, 2017, vol. 486, issue C, 168-182

Abstract: This paper employs multifractal detrended analysis (MF-DFA) and multifractal detrended cross-correlation analysis (MF-DCCA) to study cross-correlation behaviors between China’s RMB exchange rate market and four international commodity markets, using a comprehensive set of data covering the period from 22 July 2005 to 15 March 2016. Our empirical results from MF-DFA indicate that the RMB exchange rate is the most inefficient among the 4 selected markets. The results from quantitative analysis have testified the existence of cross-correlations and the result from MF-DCCA have further confirmed a strong multifractal behavior between RMB exchange rate and international commodity markets. We also demonstrate that the recent financial crisis has significant impact on the cross-correlated behavior. Through the rolling window analysis, we find that the RMB exchange rates and international commodity prices are anti-persistent cross-correlated. The main sources of multifractality in the cross-correlations are long-range correlations between RMB exchange rate and the aggregate commodity, energy and metals index.

Keywords: RMB foreign exchange rate; Energy markets; PBOC monetary policy; Impulse response function (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:486:y:2017:i:c:p:168-182

DOI: 10.1016/j.physa.2017.05.088

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