The effects of exchange rate regime reform on RMB markets: A new perspective based on MF-DCCA

Qingsong Ruan, Junjie Bao, Manqian Zhang and Limin Fan

Physica A: Statistical Mechanics and its Applications, 2019, vol. 522, issue C, 122-134

Abstract: Based on the RMB exchange rate regime reform launched by People’s Bank of China (PBoC) on Aug 11, 2015, we investigate the effects of this reform on the cross-correlations among CNH, NDF and CNY markets using multifractal detrended cross-correlation analysis (MF-DCCA) method. The empirical results show that cross-correlations among CNH, NDF and CNY markets are multifractal. Moreover, we find that this RMB exchange rate reform takes effects, as the persistence and the degree of multifractality of the cross-correlation between these series are weaker after the reform. Furthermore, we find that, after the reform, the persistent cross-correlation for CNH and CNY markets is stronger in the short term but weaker in the long term. While for NDF and CNY markets, the anti-persistent cross-correlation in the short term turn into persistent and persistent cross-correlation in the long term are stronger after the “8.11” RMB exchange rate regime reform. Finally, we find that the fat-tailed distribution is the main source of multifractality for NDF-CNY return series pair after the reform, while for CNH-CNY return series pair, the main source is still long-range correlation.

Keywords: Exchange rate markets; Cross-correlation; RMB exchange rate reform; MF-DCCA (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:522:y:2019:i:c:p:122-134

DOI: 10.1016/j.physa.2019.01.110

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