IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v31y2023i1p180-203.html
   My bibliography  Save this article

China–US economic and trade relations, trade news, and short‐term fluctuation of the RMB exchange rate

Author

Listed:
  • Wei Guo
  • Zhongfei Chen

Abstract

The trade war between the US and China affects the fluctuation of RMB exchange rate. We collect news on China–US trade policies and talks from January 2017 to July 2020. Results show that China–US dialogue and tariff imposition have the greatest impact on the percentage of RMB appreciation and depreciation. Additionally, tariff relaxation and increasing enterprise restrictions can cause a sharp appreciation and depreciation. “Policies” events and trade news from the US influence RMB fluctuations the most significantly. Finally, positive events cannot significantly cause RMB appreciation, but negative events can significantly cause RMB devaluation.

Suggested Citation

  • Wei Guo & Zhongfei Chen, 2023. "China–US economic and trade relations, trade news, and short‐term fluctuation of the RMB exchange rate," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 180-203, February.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:1:p:180-203
    DOI: 10.1111/roie.12622
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/roie.12622
    Download Restriction: no
    File URL: https://libkey.io/10.1111/roie.12622?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Martin Berka & Michael B. Devereux & Charles Engel, 2018. "Real Exchange Rates and Sectoral Productivity in the Eurozone," American Economic Review, American Economic Association, vol. 108(6), pages 1543-1581, June.
    2. Cheung, Yin-Wong & Chinn, Menzie D. & Pascual, Antonio Garcia & Zhang, Yi, 2019. "Exchange rate prediction redux: New models, new data, new currencies," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 332-362.
    3. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    4. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    5. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
    6. Liu, Li-Gang & Pauwels, Laurent L., 2012. "Do external political pressures affect the Renminbi exchange rate?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1800-1818.
    7. Michael Funke & Marc Gronwald, 2008. "The Undisclosed Renminbi Basket: Are the Markets Telling Us Something about Where the Renminbi–US Dollar Exchange Rate is Going?," The World Economy, Wiley Blackwell, vol. 31(12), pages 1581-1598, December.
    8. Arthur Korus & Kaan Celebi, 2019. "The impact of Brexit news on British pound exchange rates," International Economics and Economic Policy, Springer, vol. 16(1), pages 161-192, March.
    9. Edwards, Sebastian, 1982. "Exchange rate market efficiency and new information," Economics Letters, Elsevier, vol. 9(4), pages 377-382.
    10. Pearce, Douglas K. & Solakoglu, M. Nihat, 2007. "Macroeconomic news and exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(4), pages 307-325, October.
    11. Nusair, Salah A. & Olson, Dennis, 2022. "Dynamic relationship between exchange rates and stock prices for the G7 countries: A nonlinear ARDL approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    12. Daude, Christian & Levy Yeyati, Eduardo & Nagengast, Arne J., 2016. "On the effectiveness of exchange rate interventions in emerging markets," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 239-261.
    13. Bauwens, Luc & Ben Omrane, Walid & Giot, Pierre, 2005. "News announcements, market activity and volatility in the euro/dollar foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1108-1125, November.
    14. Schmitt-Grohé, Stephanie & Uribe, Martín, 2022. "The effects of permanent monetary shocks on exchange rates and uncovered interest rate differentials," Journal of International Economics, Elsevier, vol. 135(C).
    15. Jacob A. Frenkel, 1982. "Flexible Exchange Rates, Prices and the Role of ‘News’: Lessons from the 1970s," Palgrave Macmillan Books, in: Roy A. Batchelor & Geoffrey E. Wood (ed.), Exchange Rate Policy, chapter 2, pages 48-100, Palgrave Macmillan.
    16. Mussa, Michael, 1982. "A Model of Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 74-104, February.
    17. Clague, Christopher, 1986. "Determinants of the National Price Level: Some Empirical Results," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 320-323, May.
    18. Gau, Yin-Feng & Wu, Zhen-Xing, 2017. "Macroeconomic announcements and price discovery in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 79(C), pages 232-254.
    19. Xu, Yingying & Lien, Donald, 2020. "Dynamic exchange rate dependences: The effect of the U.S.-China trade war," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 68(C).
    20. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    21. Aquilante, Tommaso & Di Pace, Federico & Masolo, Riccardo M., 2022. "Exchange-rate and news: Evidence from the COVID pandemic," Economics Letters, Elsevier, vol. 213(C).
    22. Choi, Jae Hoon & Song, Seongho, 2022. "Revisiting the PPP puzzle: Nominal exchange rate rigidity and region of inaction," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    23. Narayan, Paresh Kumar & Bannigidadmath, Deepa & Narayan, Seema, 2021. "How much does economic news influence bilateral exchange rates?," Journal of International Money and Finance, Elsevier, vol. 115(C).
    24. Jessica Chen Weiss & Amber Wichowsky, 2018. "External influence on exchange rates: An empirical investigation of US pressure and the Chinese RMB," Review of International Political Economy, Taylor & Francis Journals, vol. 25(5), pages 596-623, September.
    25. Dooley, Michael P & Isard, Peter, 1980. "Capital Controls, Political Risk, and Deviations from Interest-Rate Parity," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 370-384, April.
    26. Guo, Wei & Chen, Zhongfei & Šević, Aleksandar, 2021. "The political pressure from the US upon RMB exchange rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    27. Munazza Jabeen & Abdul Rashid & Hajra Ihsan, 2022. "The news effects on exchange rate returns and volatility: Evidence from Pakistan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 745-769, January.
    28. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-334, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guo, Wei & Chen, Zhongfei & Šević, Aleksandar, 2021. "The political pressure from the US upon RMB exchange rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    2. Morris Goldstein & Michael Mussa, 1993. "The integration of world capital markets," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 245-330.
    3. Javier Cravino & Sam Haltenhof, 2020. "Real Exchange Rates, Income per Capita, and Sectoral Input Shares," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 180-194, March.
    4. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170, National Bureau of Economic Research, Inc.
    5. Eduardo Levy-Yeyati & Juan Francisco Gómez, 2020. "The Cost of Holding Foreign Exchange Reserves," Springer Books, in: Jacob Bjorheim (ed.), Asset Management at Central Banks and Monetary Authorities, edition 1, chapter 0, pages 91-110, Springer.
    6. Eduardo Levy Yeyati, 2019. "The Cost of Holding Foreign Exchange Reserves," CID Working Papers 353, Center for International Development at Harvard University.
    7. Martin Berka & Daan Steenkamp, 2018. "Deviations in real exchange rate levels in the OECD countries and their structural determinants," Working Papers 4, New Zealand Centre of Macroeconomics.
    8. Bartolini, Leonardo & Drazen, Allan, 1997. "When liberal policies reflect external shocks, what do we learn?," Journal of International Economics, Elsevier, vol. 42(3-4), pages 249-273, May.
    9. Munazza Jabeen & Abdul Rashid, 2022. "Macroeconomic News and Exchange Rates: Exploring the Role of Order Flow," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 222-245, May.
    10. Sebastián Edwards, 1983. "La Relación entre las Tasas de Interés y el Tipo de Cambio Bajo un Sistema de Cambio Flotante," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 20(59), pages 65-74.
    11. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, December.
    12. Max Groneck & Christoph Kaufmann, 2017. "Determinants of Relative Sectoral Prices: The Role of Demographic Change," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(3), pages 319-347, June.
    13. Munazza Jabeen & Abdul Rashid & Hajra Ihsan, 2022. "The news effects on exchange rate returns and volatility: Evidence from Pakistan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 745-769, January.
    14. Mohsen Bahmani‐Oskooee & ABM Nasir, 2005. "Productivity Bias Hypothesis and The Purchasing Power Parity: a review article," Journal of Economic Surveys, Wiley Blackwell, vol. 19(4), pages 671-696, September.
    15. Eiji Fujii, 2015. "Reconsidering The Price–Income Relationship Across Countries," Pacific Economic Review, Wiley Blackwell, vol. 20(5), pages 733-760, December.
    16. Ms. Liliana Rojas-Suárez & Mr. Donald J Mathieson & Mr. Michael P. Dooley, 1996. "Capital Mobility and Exchange Market Intervention in Developing Countries," IMF Working Papers 1996/131, International Monetary Fund.
    17. Fatma Pinar Erdem & Utku Bora Geyikci, 2018. "Local, Regional and Global FX Shock Indices in Emerging Markets," CBT Research Notes in Economics 1812, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    18. Juan José Echavarría & Andrés González, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, December.
    19. Ramon Moreno, 2001. "Pegging and stabilization policy in developing countries," Economic Review, Federal Reserve Bank of San Francisco, pages 17-29.
    20. Herrera, Santiago, 2000. "Determinantes y composición del endeudamiento público en Colombia," IDB Publications (Working Papers) 2110, Inter-American Development Bank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:31:y:2023:i:1:p:180-203. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.