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China's Capital Controls - Through the Prism of Covered Interest Differentials

Yin-Wong Cheung and Risto Herrala ()

No 142013, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We study the renminbi (RMB) covered interest differential - an indicator of the effectiveness of capital controls. It is found that the differential is not shrinking over time and, in fact, appears larger after the global financial crisis than before. That is, capital controls in China are still substantial and effective. In addition to exchange rate changes and volatilities, the RMB covered interest differential is affected by credit market tightness indicators. The marginal explanatory power of these macroeconomic factors, however, is small relative to the autoregressive component and the dummy variables that capture changes in China's policy.

Keywords: NDF Implied RMB Interest Rate; Capital Controls; Asymmetric Response; Macro Determinants; Credit Market Tightness (search for similar items in EconPapers)
JEL-codes: E44 F31 F32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: China's Capital Controls: Through the Prism of Covered Interest Differentials (2014) Downloads
Working Paper: China's capital controls: Through the prism of covered interest differentials (2013) Downloads
Working Paper: China's Capital Controls - Through the Prism of Covered Interest Differentials (2013) Downloads
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