Renminbi as Number Two in East Asia
نویسنده
چکیده
This paper investigates the emerging influence of the Chinese renminbi on the exchange rate movements of East Asian currencies. China stopped pegging her currency to the US dollar and moved into a managed floating exchange rate system on July 21, 2005. The change in China’s exchange rate regime opens a window of opportunity to investigate the influence of renminbi on the exchange rate movements of East Asian currencies. This paper uses daily exchange rate data from July 24, 2005 to October 31, 2011 for empirical analysis. Empirical results from this paper reaffirm the dominant position of the US dollar in East Asia. Our results indicate that the influence of the renminbi on the daily exchange rate movements of East Asian currencies is second only to that of the dollar. With the growing importance of the Chinese economy, the renminbi has begun to exert its influence on the exchange rate determinations in East Asia at least in the very short run. We have done extensive robustness checks to ensure the validity of our estimation results. In the 1990s and early 2000s, many studies document an increasing influence of the Japanese yen and suggest the emergence of a yen bloc in East Asia. While this issue is not the focus of the present paper, results of this paper do cast doubts on the making and prospect of a yen bloc in East Asia.
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