International Financial Adjustment for China： A Financial Valuation Approach

International financial adjustment is the process whereby valuation shifts from asset price and currency changes result in relatively durable net wealth transfers across countries' international balance sheets. This paper applies a financial valuation approach to estimate the direction and the broad extent of recent international financial adjustments on China's international balance sheet. We estimate China's international balance sheet losses resulting from the valuation shifts over the period 2005–2010 and reveal that international currency shifts over the past decade have also generated a range of non‐balance sheet financial and monetary adjustment pressures for China. This paper also evaluates how China's evolving international financial policy arrangements could better mitigate China's exposure to international financial adjustments. These arrangements include a more effective currency mechanism and the mechanisms to internationalize the RMB to buffer international financial valuation shocks.     

货币互换协议、金融市场与中国对外直接投资

基于2003-2018年169个国家的面板数据,文章利用多期双重差分方法探讨了货币互换协议对我国对外直接投资规模与密集度的影响,并通过PSM-DID方法和证伪检验对模型的稳健性进行验证。在此基础上,运用中介效应和调节效应检验方法对货币互换政策的金融市场作用机制进行分析。研究发现,货币互换协议对我国OFDI规模与密集度均有显著积极影响;预期汇率风险是货币互换协议促进我国OFDI的重要影响机制,中介传导而非调节效应是主要影响渠道,而利率市场的影响机制尚未发挥作用。在经济全球化和复杂的国际形势下,这一研究对我国进一步推动国家间金融领域深化合作和推进人民币国际化以畅通国内国际双循环具有重要参考价值。     

An Investigation of the Value Relevance of Alternative Foreign Exchange Disclosures*

We demonstrate analytically and empirically that valuing a firm with foreign operations in the presence of exchange rate uncertainty requires information on the foreign operating cash flows disaggregated by currency and persistence. In particular, given consolidated earnings, investors need information on the exchange gain or loss on permanent foreign operating cash flows. We extend the model to show how the permanent foreign cash flows can be used to condition the change in the translation adjustment to make it value‐relevant; however, using the permanent foreign cash flows directly is superior for valuation purposes. The empirical tests support our hypothesis that the market response to exchange rate movements is sensitive to the relative magnitudes of revenues and costs denominated in each foreign currency in which a firm has transactions. Disclosure of cash flows by currency should enhance the valuation of firms with foreign operations.     

Tail Causality between Crude Oil Price and RMB Exchange Rate

In this paper we assess the causal relationship between international crude oil price changes and the RMB exchange rate using daily information from 21 July 2005 to 5 April 2017. In addition to linear causality tests, we employ quantile causality test to identify prior imperceptible causality in quantiles. We find a causal relationship from crude oil price to exchange rate at each quantile interval, but the reverse only appears in tail. This may help to explain why a traditional linear test fails to capture the causality from exchange rate to crude oil price as the quantile causalities in tails are canceled out by each other. Moreover, using RMB as the settlement currency in crude oil trade can weaken the prior significant causal relationships between crude oil price and exchange rate, whereas the reform of exchange rate marketization reignites the tail causalities from exchange rate to crude oil price. These findings recommend a wider use of domestic currencies in crude oil trade to avoid risk from the crude oil market.     

论超主权国际货币的构建对世界经济的影响

金融危机的不断发生暴露出现行的国际货币体系的诸多弊端和不足,构建超主权国际货币则是国际货币制度改革的方向。汇率的稳定以及国际储备资产价值的稳定对于一国国际经济的发展尤为重要,为此世界各国希望有一种有效的国际储备货币以减轻汇率波动所带来的负面影响,这种国际储备货币便是超主权货币。文章从国际货币体系对国际贸易和国际金融的影响方面进行了探讨,进一步分析了超主权国际货币的构建对世界经济的影响。     

Chinese RMB exchange rate and local currency price stability in ASEAN trade

The article uses trade data between China and ASEAN countries to test hypotheses related to pricing to market (PTM) and consequent local currency price stability (LCPS). The degree of price discrimination associated with real RMB exchange rate changes between China and ASEAN + 2 shows evidence of local currency price stability in some industries in which exporters may be less competitive. China's trade policy may have also played a role in the local currency price stability. The article finds no evidence that RMB appreciation creates a larger impact on price adjustment than RMB depreciation.     

国际贸易结算币种的选择——实证分析及对中国的启示

本文首先总结了国际贸易结算货币的宏观前提条件和进出口商在贸易实践中的经验法则。继而通过收集全球41个国家1992～2007年的样本数据,从出口国货币、进口国货币和媒介货币计价结算三个视角进行实证研究。分析结果表明,除了汇率制度、货币的可兑换性等制度变量外,汇率的波动性、进出口贸易的规模、方向和结构也是影响结算币种选择的关键因素。因而,人民币国际结算若要取得重大进展,不仅要逐步完成资本项目的开放,完善汇率形成机制,还要努力实现贸易出口多元化,并致力于产品结构的优化升级。     

China's Exchange Rate Movements and Corporate Currency Invoicing Strategies

Since China introduced a new managed floating exchange rate regime in 2005, the persistent appreciation of the renminbi against the US dollar has led Chinese firms to reassess their choice of invoice currency among the dollar and other international alternatives to price their exports. The present paper performs a systematic invoice currency analysis by surveying the published literature, summarizing criteria for decision-making, and evaluating the choices available to Chinese exporters implementing currency invoicing strategies to maximize expected profits. This study finds that the euro could play an increasing role as the invoice currency of Chinese firms, although the US dollar will still play a dominant role. Chinese exporters might shift gradually from the dollar to the euro in the face of the falling dollar, balancing between the two by necessity.     

Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?

We investigate whether leading indicators of currency crises differ across exchange rate regimes using data for 88 countries in the period 1981–2010. Our estimates suggest that in fixed exchange rate regimes external indicators, such as deviations of the real exchange rate from trend and the growth of international reserves, have the strongest predictive power. In contrast, in floating exchange rate regimes monetary policy and credibility indicators, such as domestic credit growth and inflation, are the best leading indicators of currency crises. Both credibility and external economic indicators have predictive power in intermediate exchange rate regimes.     

The costs and benefits of exchange rate protection in China

From 2002 to 2011, China ran large surpluses in both the current and capital accounts of its balance of payments, which the People's Bank of China (PBOC) purchased and held at official foreign reserves to avoid nominal appreciation of the currency. Concurrently, with its massive purchases of foreign exchange, the PBOC compelled commercial banks to buy PBOC ‘sterilisation bonds’ and raised commercial bank reserve requirement ratios to avoid monetisation of its foreign exchange purchases and concomitant upward pressure on the price level (that is, real appreciation of the currency). Sterilising foreign exchange intervention, as China did for a decade, constitutes a violation of the implicit rules of a fixed exchange rate regime and as such can be seen as a mercantilist policy of manipulating the real exchange rate to gain, or avoid losing, international price competitiveness—what Corden (1981) termed ‘exchange rate protection’. This paper sets out the simple theory of the costs and benefits of exchange rate protection and provides back‐of‐the‐envelope estimates of their magnitude in China in the 2000s. It also explores the ‘other side of the story’, the decline in US manufacturing employment in the 2000s, which recent literature attributes to a ‘China Trade Shock’ that allegedly resulted from the US granting Permanent Normal Trade Relations (PNTR) to China in 2001. Here, it is argued that the so‐called China Trade Shock resulted from China's sterilised intervention policy, not the granting of PNTR. The implications of these competing hypotheses are considered in the conclusions.     

Testing the Unstable Middle and Two Corners Hypotheses About Exchange Rate Regimes

The recent rash of international currency crises has generated considerable interest in the role that exchange rate regimes have played in contributing to these crises. Many economists have argued that efforts to operate adjustably pegged exchange rate regimes have been a major contributor to “the unstable middle” hypothesis and some have argued that this unstable middle is so broad that only the two corners of hard fixes or floating rates will be stable in a world of high capital mobility—the two corners or bipolar hypothesis. Two recent empirical studies by researchers at the International Monetary Fund reach opposing conclusions on these issues. We examine the issue further and show that conclusions can be quite sensitive to how exchange rate regimes are grouped into categories and the measures of currency crises that are used. In general we find that the dead center of the adjustable peg is by far the most crisis prone broad type of exchange rate regimes, but that countries need not go all the way to freely floating rates or hard fixes to substantially reduce the risks of currency crises.

SDR需要人民币:基于SDR定值稳定性的研究

本文研究发现,将人民币加入SDR货币篮将减少其对主要货币的短期波动性,同时,将人民币加入SDR货币篮将有利于SDR定值的长期稳定性;以SDR对黄金和石油等大宗商品定价可以与以美元定价时相比有效降低大宗商品价格的波动性。因此,国际货币体系需要人民币加入SDR,这将有利于提升我国在国际货币体系改革中的战略主动性。     

Vertical Trade,Exchange Rate Pass-Through,and the Exchange Rate Regime

We compare the welfare of different combinations of monetary and currency policies in an open-economy macroeconomic model that incorporates two important features of many small open economies: a high level of vertical international trade and a high degree of exchange rate pass-through. In this environment, a small economy prefers a fixed exchange rate regime over a flexible regime, while the larger economy prefers a flexible exchange rate regime. There are two main causes underlying our results. First, in the presence of sticky prices, relative prices adjust through changes in the exchange rate. Multiple stages of production and trade make it more difficult for one exchange rate to balance the whole economy by adjusting several relative prices simultaneously throughout the vertical chain of production and trade. More specifically, there is a tradeoff between delivering an efficient relative price between home and foreign final goods and delivering an efficient relative price between home and foreign intermediate goods. Second, because the small economy faces a high degree of exchange rate pass-through under a flexible regime, it suffers from a lack of efficient relative prices in vertical trade. The larger economy, however, does not face this problem because its level of exchange rate pass-through is low.     

Renminbi Going Global

The present paper evaluates the international status of the Chinese currency, the renminbi (RMB), by examining its use in the global market. Specifically, the discussion focuses on the recent developments of RMB trading in the global foreign exchange market, cross‐border trade settlement in RMB, the Hong Kong offshore market and China's policies relating to the RMB. The evidence suggests that the use of the RMB overseas, especially in trade financing and in the off‐shore market, has increased rapidly in recent years. However, compared with the size of the Chinese economy, the current scale of the use of the RMB is quite small. Although the RMB has great potential to become an international currency, its acceptance in the global economy is affected by both economic and political factors. Attaining a fully fledged international RMB is still a distant goal.     

人民币汇率形成机制的实证研究(2006～2011)

本文在构建两个关于人民币汇率形成机制假说的基础上,利用TARCH模型和篮子货币模型实证研究了人民币汇率的形成机制,得出了人民币汇率交易价格的市场化程度偏低和人民币汇率依旧是钉住美元进行调节的两个结论。据此,我们认为人民币汇率形成机制改革方向应该是减少对外汇市场交易的干预和参照篮子货币调节汇率。     

国际贸易中计价货币选择的决定因素研究——基于微观视角的局部均衡分析

在既有的基于微观视角的包含两币的局部均衡模型中引入交易货币,发现国际贸易中计价货币选择的决定因素依次为:卖方市场结构、出口品差异化程度、出口国所占目标市场份额、其他出口商的计价策略和汇率的稳定性.在同质性商品的国际贸易中,计价货币的非同质性会导致货币垄断计价.其中,进口方货币的垄断计价地位较为稳定,出口方货币垄断计价情...     

Monetary autonomy in selected Asian economies: The role of international reserves

With the increased financial integration of Asian countries, monetary policy takes on the additional role of maintaining the stability of the financial system along with the traditional objectives of promoting growth and employment with price stability. Given the importance and relevance of monetary policy in Asian countries, we examine monetary autonomy and its interaction with financial integration, currency regimes and international reserves for the past two decades in the following Asian countries: Thailand, Korea, Indonesia, the Philippines, and India. The empirical analysis reveals two significant and interesting findings that have policy implications. First, Thailand, Korea and Indonesia, countries that have moved towards a floating currency regime, experienced simultaneous declines in the sensitivity of their interest rates (thereby increasing monetary autonomy), while India continues to increase the sensitivity of its interest rates with a pegged exchange rate and increased financial integration. Second, in all of the studied economies, the accumulation of international reserves has contributed, to some extent, to the retention of monetary autonomy in terms of preventing the sensitivity of the interest rates from rising. We speculate that the accumulation of reserves plays the role of an anchor for monetary autonomy in emerging market economies facing a “fear of floating”.     

Exchange Rate Regimes: Middling Through

Abstract

The appropriate exchange rate regime, in the context of integration of currency markets with financial markets and of large international capital flows, continues to be a policy dilemma. It is found that the majority of countries are moving towards somewhat higher exchange and lower interest rate volatility. Features of foreign exchange (forex) markets could be partly motivating these choices. A model with noise trading, non-traded goods and price rigidities shows that bounds on the volatility of the exchange rate can lower noise trading in forex markets; decrease fundamental variance and improve real fundamentals in an emerging market economy (EME); and give more monetary policy autonomy. Central banks prefer secret interventions where they have an information advantage or fear destabilizing speculation. But in the model discussed in this article, short-term pre-announced interventions can control exchange rate volatility, pre-empt deviations in prices and real exchange rates, and allow markets to help central banks achieve their targets. The long-term crawl need not be announced. In conclusion, the regime's applicability to an EME is explored.     

Is Asian Currency Unit Attractive to East Asian Economies？

Pegging the RMB exchange rate to the Asian currency unit (ACU) has not, at least in the short term, been proved a better solution than pegging to the US dollar or pegging to a G‐3 (US$, Japanese yen and euro) currency basket. Although the Asian currency unit can help Asian economies to keep the relative price of regional currencies stable, the cost of joining a formal regional monetary cooperation is the relinquishment of the autonomy of their domestic policies. Asian monetary cooperation needs to provide more potential benefits if it is to attract Asian economies. We argue that Asian monetary cooperation should be designed to solve the problem of regional trade imbalance, and regional exchange rate policy coordination should be adopted as the first step towards exchange rate cooperation. (Edited by Zhinan Zhang)     

弱势美元背景下的中国资本账户开放

2006年以来,美元对国际主要货币的大幅贬值导致全球金融市场动荡,国际短期资本大量流向中国,威胁中国的金融安全,使中国有步骤推进人民币资本账户可兑换、促进跨境资金双向流动的计划受到挑战。中国需要继续完善市场经济体制,按照市场化原则稳步推进资本账户开放;采取盯住货币汇率制度、完善外汇市场等手段,促进人民币汇率的稳定和灵活;提升人民币的国际影响力,增强中国经济抵抗外部冲击的能力。