Work

How do China's categorical economic policy uncertainties affect the long-term correlation between onshore and offshore RMB exchange rates?

Year: 2025

Type: article

Abstract: Economic policy uncertainty is a key determinant of exchange rate stability. This study investigates the impact of China's categorical economic policy uncertainties on the long-term correlation between onshore (CNY) and offshore (CNH) Renminbi (RMB) exchange rates. We find that fiscal policy uncertainty (FPU), monetary policy uncertainty (MPU), and exchange rate and capital account uncertainty (EXRPU) have a significant negative effect on this correlation, while trade policy uncertainty (TPU) has no significant impact. Furthermore, CNY and CNH do not effectively diversify risks and provide only limited hedging benefits.

Source: Finance Research Open

DOI: 10.1016/j.finr.2025.100071

Authors: Lidong Ma, Youlin Xiong, Jun Shen

Institution: Jinan University

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,000

Funders: Major Program of National Fund of Philosophy and Social Science of China, National Social Science Fund of China