Publication Type

Journal Article

Version

acceptedVersion

Publication Date

7-2021

Abstract

This paper investigates the degree of connectedness of Asia Pacific forex markets post global financial crisis and relates it to developments in the renminbi markets. The connectedness measure developed by Diebold and Yilmaz (2014) reveal the strength of linkages across the US dollar currency pairs of twelve currencies, namely offshore renminbi, onshore renminbi, euro, yen, Australian dollar, Indian rupee, Korean won, Malaysian ringgit, New Zealand dollar, Singapore dollar, Thai baht and Taiwan dollar. With the gradual liberalization of China’s exchange rate system, shocks from the renminbi markets contribute more to fluctuations in almost all individual Asia Pacific currency markets vis-a-vis the yen. Rolling regressions show a number of Asia Pacific currencies exhibit tighter association with the renminbi when the latter underwent exchange rate regime reform. Finally, results from a two-step analysis involving a panel regression provide evidence that time-varying sensitivities of Asia Pacific currencies to the renminbi are directly related to the countries’ trade and financial links with China.

Keywords

Asia Pacific forex markets, connectedness, onshore and offshore renminbi

Discipline

Asian Studies | Finance | Macroeconomics

Research Areas

Macroeconomics

Publication

International Journal of Finance and Economics

Volume

26

Issue

3

First Page

3807

Last Page

3818

ISSN

1076-9307

Identifier

10.1002/ijfe.1988

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1002/ijfe.1988

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