EconPapers    
Economics at your fingertips  
 

Does the Chinese Interest Rate Follow the US Interest Rate?

Yin-Wong Cheung, Dickson Tam and Matthew S. Yiu

No 1943, CESifo Working Paper Series from CESifo Group Munich

Abstract: One argument for floating the Chinese renminbi (RMB) is to insulate China’s monetary policy from the US effect. However, we note that both theoretical considerations and empirical results do not offer a definite answer on the link between exchange rate arrangement and policy dependence. We examine the empirical relevance of the argument by analyzing the interactions between the Chinese and US interest rates. Our empirical results, which appear robust to various assumptions of data persistence, suggest that the US effect on the Chinese interest rate is quite weak. Apparently, even with its de facto peg to the US dollar, China has alternative measures to retain its policy independence and de-link its interest rates from the US rate. In other words, the argument for a flexible RMB to insulate China’s monetary policy from the US effect is not substantiated by the observed interest rate interactions.

Keywords: policy dependence; interest rate interactions; exchange rate regime (search for similar items in EconPapers)
JEL-codes: E50 F33 G15 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
https://www.cesifo-group.de/DocDL/cesifo1_wp1943.pdf (application/pdf)

Related works:
Journal Article: Does the Chinese interest rate follow the US interest rate? (2008) Downloads
Working Paper: Does the Chinese Interest Rate Follow the US Interest Rate? (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1943

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-09-12
Handle: RePEc:ces:ceswps:_1943