 Interdependence between foreign exchange rate and international reserves: Fresh evidence from ChinaZhuhua Jiang and Seong-Min Yoon Research in International Business and Finance, 2024, vol. 69, issue C Abstract: This study aimed to explore the motives behind the intervention of China’s foreign exchange authorities in the foreign exchange (FX) market. The research was conducted between January 1995 and December 2020, using quantile analysis and wavelet analysis techniques. The results of the wavelet coherence revealed that between 2009 and 2011, depreciation of the nominal effective exchange rate caused an increase in reserves, supporting the mercantilist motive of maintaining export competitiveness. However, between 2015 and 2017, the results indicated that depreciation of the exchange rate were related to a decrease in foreign reserves, which suggests that the FX authorities intervened to stabilize the value of the Chinese currency. The findings also showed that as FX market reforms progressed, the function of international reserves shifted from a mercantilist motive to a precautionary motive to hedge against balance of payments instability. Keywords: Foreign exchange rate; International reserves; Quantile causality; Wavelet decomposition; Wavelet coherence (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:riibaf:v:69:y:2024:i:c:s0275531924000473 DOI: 10.1016/j.ribaf.2024.102255 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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