Exchange rate persistence of the Chinese yuan against the US dollar in the NDF market

Carlos Barros, Luis Gil-Alana and Zhongfei Chen

Empirical Economics, 2016, vol. 51, issue 4, No 5, 1399-1414

Abstract: Abstract This article analyses the persistence of the exchange rates of the Chinese yuan against the US dollar in the NDF market during 1999–2012 with fractional integration technique. It concludes that the exchange rates are I(d) with d close to 1 though statistically significantly below 1, suggesting a small degree of mean reverting behaviour. And the squared returns display long memory with an order of integration of about 0.2. Moreover, the unit root null hypothesis cannot be rejected during the years during 2006–2011 when the international financial crisis broke out and the exchange rate regime reform implemented. At last, we notice that d in the original series is highly negatively correlated with respect to the mean and the variance in the exchange rates, while it is positively correlated with them in the squared returns. And policy implications are also suggested.

Keywords: Yuan; Exchange rate; Long memory; NDF (search for similar items in EconPapers)
JEL-codes: C22 E31 E44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00181-015-1063-3

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