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China’s intervention in the central parity rate: A Bayesian Tobit analysis

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  • Li, He
  • Zhang, Zhichao
  • Zhang, Chuanjie

Abstract

This paper investigates China’s daily foreign exchange intervention through the setting and adjustment of the central parity rate, using daily data from July 22, 2005 to July 22, 2013. Applying a Bayes Tobit model, we find evidence that China’s daily price intervention decision is driven by market developments regarding the Chinese currency, international currency movements and macroeconomic conditions. The results further suggest that the objectives of China’s daily price intervention change not only over time, but also between high and low interventions.

Suggested Citation

  • Li, He & Zhang, Zhichao & Zhang, Chuanjie, 2017. "China’s intervention in the central parity rate: A Bayesian Tobit analysis," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 612-624.
    • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pa:p:612-624
    DOI: 10.1016/j.ribaf.2016.07.017
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    Cited by:

    1. Jia, Fei & Shen, Yao & Ren, Junfan & Xu, Xiangyun, 2021. "The impact of offshore exchange rate expectations on onshore exchange rates: The case of Chinese RMB," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    Foreign exchange intervention; Exchange rate policy; China; Tobit models; Gibbs sampling;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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