利差、美元指数与跨境资本流动

一般认为跨境资本流动由利差决定,政策制定也强调利差对资本流动的指示意义。但本文发现,中国跨境资本流动历史上主要是由套汇而非套息资本决定,且套汇的显著指标是多边美元指数(DXY)而非人民币兑美元双边汇率,我们把这一现象称之为“中国的跨境资本流动之谜”。我们提出,汇率影响大于利率且多边汇率影响大于双边汇率的原因在于人民币兑美元双边汇率历史上波动幅度较小,及时和充分反映中美基本面的分化还不够。美元指数是市场指标,能够预示人民币兑美元双边汇率的走势,进而驱动资本流动。进一步研究发现,由于中国经济的外溢效应,中美经济基本面的分化不仅决定中美利差,还在很大程度上驱动美欧、美日经济基本面的分化,进而略有时滞地驱动美元指数。因此,中美利差在统计意义上是美元指数的同步甚至略微领先的指标,从这个意义上讲,政策制定仍要关注利差。随着人民币汇率弹性增强,中美利差和美元指数对中国跨境资本流动的解释力都会边际减弱。

Interest Rate Differential,the Dollar Index,and China's Capital Flows

Understanding the drivers of China's cross-border capital flows is critical for maintaining financial stability and curbing financial risks in China. Cross-border flows are generally driven by both push and pull factors. Conventional wisdom holds that these can be best captured by interest rate differentials across countries. However, interest rate differentials are not the only driver of China's cross-border flows. Empirical studies suggest that speculation on potential price movements in bilateral exchange rates (i.e., currency speculation) is also an important motivation. In history, as both the interest rate and the RMB exchange rate are not fully market-driven in China, there may be other factors that have affected China's cross-border flows.To shed light on this important issue, we focus on the role of the U.S. dollar index (DXY). Leveraging the time-varying parameter vector auto-regression (TVPVAR) method, we find that the DXY is the most critical factor in determining China's cross-border flows. This finding is robust to a variety of sample periods and model specifications. Why is the exchange rate more important than the interest rate？ And why is the multilateral dollar exchange rate more critical than the bilateral exchange rate of the RMB against the U.S. dollar？ We refer these questions as “the conundrum of China's cross-border capital flows.” To resolve this conundrum, we examine the channels through which the DXY affects capital flows and propose a novel framework to explain China's cross-border flows. Our empirical results suggest that the DXY influences capital flows through two main channels. The first is via exchange rate expectations. For a long period, the RMB exchange rate was either pegged or crawling pegged to the U.S. dollar, resulting in the low flexibility of the RMB. In this condition, when factors other than China's economic fundamentals make the U.S. dollar appreciate, the RMB is expected to depreciate, which leads to the outflow of speculative capital. Similarly, when the U.S. dollar depreciates, the RMB is expected to appreciate, which attracts capital flows. Therefore, when the bilateral RMB exchange rate against the U.S. dollar cannot make timely adjustments based on fundamentals, the DXY becomes a leading indicator of RMB exchange rate expectations, thereby driving capital flows. The second channel is through risk appetite. Studies document that the U.S. dollar cycle is highly correlated with the global risk appetite and the DXY is becoming the best representation of global investors' risk appetite. As the world's most important financing currency, the value of the U.S. dollar affects the willingness and ability of major global financial institutions to provide liquidity through the balance sheet effect. If the DXY drives China's cross-border capital flows, what drives the DXY？ Our results show that the China-U.S. interest rate differential increasingly explains and even leads the DXY. The China-U.S. interest rate differential first and foremost reflects the differentiation of the economic fundamentals of the two economies. As China's spillovers become stronger, however, the China-U.S. differential also drives and reflects economic differentiation between the U.S. and other major economies, including Europe and Japan. Accordingly, the China-U.S. interest rate differential could still explain and lead the DXY, despite the index not including the RMB. Our most critical contributions are uncovering a novel factor that determines China's capital flows—the DXY—and showing that it is more important than interest rate differentials. However, we also find that China-U.S. interest rate differentials can explain the DXY. The explanation for these seemingly contradictory findings lies in the historical inflexibility of the RMB’s bilateral exchange rate, which does not fully reflect shifts in economic fundamentals in a timely and adequate manner. This lagging and insufficient response can be corrected through two channels. One channel is through capital flows driven by interest rate differentials, a traditional channel frequently highlighted in the literature and by policymakers. We emphasize a brand new and more critical channel: the exchange rate speculation channel arising from the lack of exchange rate flexibility.China's economy drives the DXY due to its increasing spillovers to Europe and Japan. The DXY in turn drives China's cross-border flows by affecting exchange rate expectations and global risk appetite. When changes in the bilateral exchange rate are lagging and insufficient, currency speculation and changes in risk appetite could lead to large and volatile capital flows. Therefore, increasing exchange rate flexibility would not only increase monetary policy independence but also significantly reduce the overshooting of capital flows.