China and other emerging market economies hoM large amounts of US dollar （USD）-denominated assets while their enterprises mainly raise funds from domestic banks. These economies＇currencies are under a constant pres...China and other emerging market economies hoM large amounts of US dollar （USD）-denominated assets while their enterprises mainly raise funds from domestic banks. These economies＇currencies are under a constant pressure to appreciate. The authors of this paper apply the model used in Bernanke et al. （1999） to small open economies in order to find out the optimal exchange rate regime for the emerging market economies. Findings indicate that a country＇s choice of exchange rate regime is directly associated with its percentage of USD-denominated assets and the strength of the financial accelerator effect. A managedfloating rate regime is more desirable than afreefloating regime because of its ability to better avoid liquidity traps given appreciation pressure. A managed floating rate regime also outperforms a fixed exchange rate regime because the former tends to cause less welfare loss. These factors make a managed floating rate regime the optimal choice for emerging market economies. Lastly, the authors propose policy steps and suggestions based specifically on China＇s current situation.展开更多
In this paper we study the determinants of gross capital flows, project the size of China＇s international investment position in 2020, and analyze the implications for the renminbi real exchange rate if China liberal...In this paper we study the determinants of gross capital flows, project the size of China＇s international investment position in 2020, and analyze the implications for the renminbi real exchange rate if China liberalizes the capital account. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of the current decade, a timetable consistent with recent proposals by the People ＇s Bank of China. Our analysis shows that if the capital account were liberalized, China＇s gross international investment position would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country ＇s GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment income from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalization as capital flows are expected to be two-sided. The renminb i real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.展开更多
The present paper studies China＇s national level currency exposure since 2005 when the country adopted a new exchange rate regime allowing the renminbi （RMB） to move towards greater flexibility. Using generalized a...The present paper studies China＇s national level currency exposure since 2005 when the country adopted a new exchange rate regime allowing the renminbi （RMB） to move towards greater flexibility. Using generalized autoregressive conditional heteroskedastic and constant conditional correlation-generalized autoregressive conditional heteroskedastic methods to estimate the augmented capital asset pricing models with orthogonalized stock returns, we find that China equity indexes are significantly exposed to exchange rate movements. In a static setting, there is strong sensitivity of stock returns to movements of China＇s trade- weighted exchange rate, and to the bilateral exchange rates except the RMB/dollar rate. However, in a dynamic framework, exposure to all the bilateral currency pairs under examination is significant. The results indicate that under the new exchange rate regime, China＇s gradualist approach to moving towards greater exchange rate flexibility has managed to keep exposure to a moderate level. However, we find evidence that in a dynamic setting, the exposure of the RMB to the dollar and other major currencies is significant. For China, the challenge of managing currency risk exposure is looming greater.展开更多
在Rudebusch and Svensson(1999)模型中引入了房地产价格、股票价格和汇率因素,以此为基础推导出最优货币政策反应函数。该反应函数显示,中央银行既要应对产出和通货膨胀变化,还应该考虑资产价格和汇率波动。基于GMM方法的实证分析表明...在Rudebusch and Svensson(1999)模型中引入了房地产价格、股票价格和汇率因素,以此为基础推导出最优货币政策反应函数。该反应函数显示,中央银行既要应对产出和通货膨胀变化,还应该考虑资产价格和汇率波动。基于GMM方法的实证分析表明,该反应函数能够较好刻画过去10多年间中国中央银行的货币政策。总体而言,该反应函数可以作为中国货币政策制定和执行的参考框架,货币政策应该对资产价格和汇率波动给予一定程度的关注。展开更多
文摘China and other emerging market economies hoM large amounts of US dollar （USD）-denominated assets while their enterprises mainly raise funds from domestic banks. These economies＇currencies are under a constant pressure to appreciate. The authors of this paper apply the model used in Bernanke et al. （1999） to small open economies in order to find out the optimal exchange rate regime for the emerging market economies. Findings indicate that a country＇s choice of exchange rate regime is directly associated with its percentage of USD-denominated assets and the strength of the financial accelerator effect. A managedfloating rate regime is more desirable than afreefloating regime because of its ability to better avoid liquidity traps given appreciation pressure. A managed floating rate regime also outperforms a fixed exchange rate regime because the former tends to cause less welfare loss. These factors make a managed floating rate regime the optimal choice for emerging market economies. Lastly, the authors propose policy steps and suggestions based specifically on China＇s current situation.
文摘In this paper we study the determinants of gross capital flows, project the size of China＇s international investment position in 2020, and analyze the implications for the renminbi real exchange rate if China liberalizes the capital account. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of the current decade, a timetable consistent with recent proposals by the People ＇s Bank of China. Our analysis shows that if the capital account were liberalized, China＇s gross international investment position would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country ＇s GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment income from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalization as capital flows are expected to be two-sided. The renminb i real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.
文摘The present paper studies China＇s national level currency exposure since 2005 when the country adopted a new exchange rate regime allowing the renminbi （RMB） to move towards greater flexibility. Using generalized autoregressive conditional heteroskedastic and constant conditional correlation-generalized autoregressive conditional heteroskedastic methods to estimate the augmented capital asset pricing models with orthogonalized stock returns, we find that China equity indexes are significantly exposed to exchange rate movements. In a static setting, there is strong sensitivity of stock returns to movements of China＇s trade- weighted exchange rate, and to the bilateral exchange rates except the RMB/dollar rate. However, in a dynamic framework, exposure to all the bilateral currency pairs under examination is significant. The results indicate that under the new exchange rate regime, China＇s gradualist approach to moving towards greater exchange rate flexibility has managed to keep exposure to a moderate level. However, we find evidence that in a dynamic setting, the exposure of the RMB to the dollar and other major currencies is significant. For China, the challenge of managing currency risk exposure is looming greater.
文摘在Rudebusch and Svensson(1999)模型中引入了房地产价格、股票价格和汇率因素,以此为基础推导出最优货币政策反应函数。该反应函数显示,中央银行既要应对产出和通货膨胀变化,还应该考虑资产价格和汇率波动。基于GMM方法的实证分析表明,该反应函数能够较好刻画过去10多年间中国中央银行的货币政策。总体而言,该反应函数可以作为中国货币政策制定和执行的参考框架,货币政策应该对资产价格和汇率波动给予一定程度的关注。
