The Impact of Central Bank Actual Intervention on Corporate Foreign Exchange Exposure: Evidence from China

Jiakun Peng ()
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Jiakun Peng: Jinan University, School of Economics

A chapter in Proceedings of the 2025 3rd International Conference on Digital Economy and Management Science (CDEMS 2025), 2025, pp 687-695 from Springer

Abstract: Abstract Under the backdrop of deepening exchange rate marketization and capital account liberalization in China, central bank foreign exchange interventions remain a critical tool for stabilizing currency volatility. This study investigates how the People’s Bank of China’s (PBOC) actual interventions influence corporate foreign exchange (FX) risk exposure using quarterly data from 2005Q3 to 2022Q4 for 4,028 A-share listed firms. By constructing a dynamic FX risk exposure metric and employing a fixed-effects panel model, we find that actual interventions significantly reduce corporate FX risk exposure by mitigating exchange rate volatility. However, this effect weakens post the 2015 “8·11 Exchange Rate Reform” due to enhanced marketization. Furthermore, interventions exhibit asymmetric effects, showing stronger efficacy during depreciation crises. These findings provide policymakers with insights into optimizing intervention strategies in transitional economies.

Keywords: Actual intervention; Foreign exchange exposure; Asymmetric effects; Marketization reform (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-770-0_77

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DOI: 10.2991/978-94-6463-770-0_77

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