Connectedness of Asia Pacific forex markets: China's growing influence

Autor: Hwee Kwan Chow
Rok vydání: 2020
Předmět:
Zdroj: International Journal of Finance & Economics. 26:3807-3818
ISSN: 1099-1158
1076-9307
DOI: 10.1002/ijfe.1988
Popis: 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) (Journal of Econometrics, 182, 119–134) reveal the strength of linkages across the U.S. dollar currency pairs of 12 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.
Databáze: OpenAIRE
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