Abstract

This study utilises a time-varying wavelet analysis to examine the relationship between the onshore spot market and the offshore non-deliverable forward (N.D.F.) market of the Chinese Yuan (C.N.Y.). Given the presence of structural changes in the two markets, we did not find any stable causality during the sample period. However, in some sub-samples, we found that there is a strong nonlinear causal relationship running from the onshore spot market to the offshore N.D.F. market. Ties between the two markets are closer after the widening of the onshore trading band, first in April 2012, second in March 2014 and again in August 2015. The onshore spot market is heavily influenced by interventions by the People's Bank of China (P.B.C.). These findings imply that offshore N.D.F. market development is not divorced from onshore development, as developments in the onshore spot market influence the offshore N.D.F. market. The results show that the exchange rate markets for the C.N.Y. are not efficient. Thus, to successfully internationalise the C.N.Y., financial expansion of the onshore spot market should keep pace with the growing offshore N.D.F. market to minimise destabilisation of the C.N.Y.

Details

Title
Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?
Author
Chi-Wei, Su 1 ; Kai-Hua, Wang 2 ; Heng-Guo, Zhang 3 ; Nian, Rui 4 

 School of Economics, Qingdao University, Qingdao, China; 
 Department of Finance, Ocean University of China, Qingdao, China; 
 School of Economics, Ocean University of China, Qingdao, China; 
 College of Information Science and Engineering, Ocean University of China, Qingdao, China 
End page
1644
Publication year
2019
Publication date
Dec 2019
Publisher
Taylor & Francis Ltd.
ISSN
1331677X
e-ISSN
18489664
Source type
Scholarly Journal
Language of publication
English
ProQuest document ID
2371518841
Copyright
© 2019 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.