What Factors Affect the RMB Carry Trade Return for Sustainability? An Empirical Analysis by Using an ARDL Model

With the internationalization of RMB and the openness of China’s capital account, the amount of foreign institutions investing in China has increased significantly. Based on China’s daily data from January 2007 to September 2021, this study investigated the factors that affect the RMB carry-trade return for sustainability. By comparing the results of the carry return before and after the foreign-exchange reform on 11 August 2015, this study found that the RMB carry return has become more traceable after the exchange-rate reform. Meanwhile, the model fitting degree of explaining the RMB carry return was higher, and there were fewer missing variables. Therefore, this study found that after the RMB-exchange-rate mechanism became more market oriented, the RMB carry return became more reasonable, and the carry trade can play a better role in foreign-exchange pricing. Meanwhile, after using the RMB non-deliverable forwards (NDF) to construct a carry-trade position to perform the robustness test, such results were consistent. With different results before and after the exchange-rate reform, this study can provide references for policy makers and investors for sustainable development.

Using Textual and Economic Features to Predict the RMB Exchange Rate

This research proposes an integrated framework for the use of textual and economic features to predict the exchange rate of the TWD (Taiwan dollar) against the RMB (Chinese Renminbi). The exchange rate is affected by the current economic situation and expectations for the future economic climate. Exchange rate forecasting studies focus mainly on overall economic indices and the actual exchange rate, but overlook the influence of news. This research considers both textual and economic factors and builds three basic prediction models, i.e. multiple linear regression (MLR), support vector regression (SVR), and Gaussian process regression (GPR) for the prediction of the RMB exchange rate. In addition to the three basic prediction models, this research uses ensemble learning and feature selection techniques to improve prediction performance. Our experiments demonstrate that textual features also play an important role in predicting the RMB exchange rate. The SVR model is shown to outperform the other models and the MLR model is shown to perform worst. The ensemble of three basic models performs better than its individual counterparts. Finally, the models which use feature selection techniques demonstrate improved results in general, and different feature selection techniques are shown to be more suitable for different prediction models. JEL classification numbers: D80, F31, F47. Keywords: Exchange rate prediction, Text mining, Ensemble learning, Time series forecasting.

Do the RMB exchange rate and global commodity prices have asymmetric or symmetric effects on China’s stock prices?

With the rapid expansion of the RMB exchange rate’s floating range, the effects of the RMB exchange rate and global commodity price changes on China’s stock prices are likely to increase. This study uses both auto regressive distributed lag (ARDL) and nonlinear ARDL (NARDL) approaches to explore the symmetric and asymmetric effects of the RMB exchange rate and global commodity prices on China’s stock prices. Our findings show that without considering the critical variable of global commodity prices, there is no cointegration relationship between the RMB exchange rate and China’s stock prices, and the coefficient of the RMB exchange rate is not statistically significant. However, when we introduce global commodity prices into the NARDL model, the result shows that the RMB exchange rate has a negative effect on China’s stock prices, that there indeed exists a long-run cointegration relationship among the RMB exchange rate, global commodity prices, and stock prices in the NARDL model, and that global commodity price changes have an asymmetric effect on China’s stock prices in the long run. Specifically, China’s stock prices are more sensitive to increases than decreases in global commodity prices. Thus, increases in global commodity prices cause China’s stock prices to decline sharply. In contrast, the same magnitude of decline in global commodity prices induces a smaller increase in China’s stock prices.

The Concrete Analysis of the Change of Import and Export Trade of Chinese Enterprises Is Based on the Perspective of RMB Exchange Rate

The change of import and export trade of Chinese enterprises actually reflects the appreciation and depreciation of RMB, which are closely related to the total volume of import and export trade of Chinese enterprises and the formulation of corresponding foreign exchange measures.Generally speaking, the rise of the RMB exchange rate means the appreciation of the RMB is conducive to imports, while the decline of the RMB exchange rate means the depreciation of the RMB and the decline of the price of export commodities, so it has a greater price advantage and is conducive to exports. Chinese enterprises should correctly grasp the rise and fall of RMB exchange rate and carry out import and export trade reasonably when developing abroad.

LEVEL AND VOLATILITY SPILLOVERS OF ONSHORE AND OFFSHORE RMB EXCHANGE RATE IN GLOBAL AND REGIONAL MARKETS

This paper investigates onshore and offshore RMB exchange rates’ bi-direction spillover effects with seven global and Asian currencies. We find that the onshore RMB exchange rate has more substantial global and Asia spillovers in both mean and volatility than offshore RMB. Offshore RMB exchange rate shows no outward level and ARCH spillovers to three widely traded global currencies. Moreover, we examine spillover effects changes along with RMB exchange rate policy reform. We found that although the volatility of both onshore and offshore RMB increased, the onshore RMB spillovers strengthen while offshore RMB spillovers decline.