What Drives Growing Currency Co-movements with the Renminbi?

Bokyeong Park () and Jiyoun An
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Bokyeong Park: Kyung Hee University

East Asian Economic Review, 2020, vol. 24, issue 1, 31-59

Abstract: China’s increasing trade volume and continuous integration with global financial markets have strengthened the influences of the renminbi on the exchange rates of different currencies. Previous studies find closer co-movements between the renminbi and other currencies. This paper is novel to investigate the underlying determinants of the comovement further, using panel data of over thirty-four countries. Our results show that stronger bilateral trade and financial linkages with China have a positive association with the currency co-movement. Moreover, countries with greater flexibility in exchange rate regimes show stronger co-movements. These findings imply that growing co-movements are the consequence of autonomous decisions at the market rather than that of management by governments or central banks.

Keywords: Currency Co-movements; Renminbi; Trade Linkage; Financial Linkage; Exchange Rate Regime (search for similar items in EconPapers)
JEL-codes: F31 F33 F36 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0371

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