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Exchange Rate Flexibility in China: Measurement, Regime Shifts and Driving Forces of Change

Dixon, R.; Zhang, Z.; Dai, Y.

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Authors

Y. Dai



Abstract

With an emphasis on government intervention that hinders market forces in currency movements, this paper presents a nuanced investigation of the degree and dynamics of flexibility in China's exchange rate regime. A high-frequency data model is developed to more accurately detect the extent to which the Chinese currency is market-driven. This indicator is then utilized in a Markov switching model to examine shifts in RMB regime flexibility. The results suggest a moderate increase in exchange rate flexibility since the 2005 reform. Additionally, two switching states are captured, and possible driving factors are discussed.

Citation

Dixon, R., Zhang, Z., & Dai, Y. (2016). Exchange Rate Flexibility in China: Measurement, Regime Shifts and Driving Forces of Change. Review of International Economics, 24(5), 875-892. https://doi.org/10.1111/roie.12226

Journal Article Type Article
Acceptance Date Feb 22, 2016
Online Publication Date Apr 19, 2016
Publication Date Nov 1, 2016
Deposit Date Feb 24, 2016
Publicly Available Date Apr 19, 2018
Journal Review of International Economics
Print ISSN 0965-7576
Electronic ISSN 1467-9396
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 24
Issue 5
Pages 875-892
DOI https://doi.org/10.1111/roie.12226
Public URL https://durham-repository.worktribe.com/output/1387856

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Copyright Statement
This is the accepted version of the following article: Dixon, R., Zhang, Z. and Dai, Y. (2016), Exchange Rate Flexibility in China: Measurement, Regime Shifts and Driving Forces of Change. Review of International Economics, 24(5): 875-892, which has been published in final form at http://dx.doi.org/10.1111/roie.12226. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.







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