U.S. monetary policy uncertainty and RMB deviations from covered interest parity
Zhitao Lin and
Xingwang Qian ()
Additional contact information
Zhitao Lin: Jinan University
No GRU_2020_029, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit
This paper examines how U.S. monetary policy uncertainty (MPU) affects RMB deviations from covered interest parity (CIP) and how this effect is influenced by China’s capital controls, the RMB exchange rate regime, and international reserves that constrain the transmitting channel of U.S. MPU shocks. Our findings show that U.S. MPU has a spillover effect and creates deviations from RMB CIP. Capital controls insulate uncertainty shocks and alleviate the U.S. MPU spillover effect. There are some evidences that international reserves alleviate and the liberalized RMB exchange rate regime magnifies the spillover effect. However, their effects become insignificant in the presence of capital controls. Moreover, the U.S. MPU effect on RMB CIP deviation became prominent after the 2008 global financial crisis.
Keywords: U.S. MPU; deviation from CIP; RMB cross-currency basis; capital controls; exchange rate regime; international reserves (search for similar items in EconPapers)
JEL-codes: E43 F31 G15 (search for similar items in EconPapers)
Pages: 20 pages
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2020_029
Access Statistics for this paper
More papers in GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit Contact information at EDIRC.
Bibliographic data for series maintained by GRU ( this e-mail address is bad, please contact ).