Empirical Analysis of RMB Price Discovery Effects Between China Sovereign CDS spread, offshore RMB and Global Financial Market Variables: Comparative analysis of China, Japan and South Korea

Kim, Woong Ryeol; Kim, Moon-Kyum

doi:10.1109/snpd.2019.8935719

Cited by 1 publication

(2 citation statements)

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“…However, the analysis result showed that the non-international currency, the won, has a stronger Granger causal relationship with variables in the international financial market than that of Chinese the yuan. In [14] the author analyzed the effects of international financial market variables and currency exchange rates on the country CDS premium. They argued that the Granger causal relationship of the international financial market variables and the won-dollar exchange rate that affect the Korea country CDS premium is stronger than that of the China country CDS premium.…”

Section: *Japan Yenmentioning

confidence: 99%

“…However, they argued that the Yuan, which is in the process of internationalization, and the Won, a noninternational currency, imply arbitrage opportunities through SWAP transactions. In [14], the author used the VECM (Vector Error Correction Model) model to analyze the relationship between the country CDS Premiums of Korea, China and Japan, the exchange rate and the variables of the international financial market. They argued that while the country CDS Premiums of Korea and Japan were more closely related to the variables in the international financial market, the Chinese CDS Premiums had a weak relationship.…”

Section: Introductionmentioning

confidence: 99%

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Analysis of Long-term Equilibrium Relationship Between KRW, RMB, JPY Exchange Rates and International Financial Market Variables: Comparative Analysis of KRW, RMB, JPY

Kim¹,

Kim²

2020

Adv. sci. technol. eng. syst. j.

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This study used 15 VECM analysis models to analyze the relationship among exchange rates of South Korea, China and Japan; and between exchange rates of each country and international financial market variables. The analysis variables are the Won, Yuan, Yen spot exchange rates and international financial market variables. The results of the analysis are as follows: First, there was a long-term cointegration relationship between RMB, KRW, JPY and international financial market variables. Second, the analysis results of the VECM showed that explanatory power of Korea's offshore Won-Dollar accounts for 50% of the onshore Won-Dollar. The results of the analysis of the Yuan's VECM showed that the onshore Yuan (CNY) and offshore Yuan (CNH) exchange influence, but each has its own independent characteristics. Overall, the Won is more integrated with the international financial market than the Yuan. The Yen's relationship with variables in the international financial market was stronger than that of the Won and the Yuan. Third, offshore Won-Dollar, onshore KRW, and JPY had similar Granger causality relationship and impulse responses with international financial market variables. However, CNH and CNY indicated weaker than that of Won and Yen. The onshore Won-Dollar is shown to partially offset the shock from the onshore Yuan and offshore Yuan. The implications of this study are as follows: First, it is important to look at the exchange rate from the perspective of the international financial market. Second, Yuan investment and risk management are necessary considering the characteristics of the onshore and offshore Yuan which are interrelated but also distinctly unique markets. Third, it is necessary to manage the exchange rate position, taking into account the long-term equilibrium relationship among the Won, Yuan, and Yen currencies. Fourth, Korean companies should find a way to actively utilize the Won which shows the characteristics of partial internationalization.

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Section: *Japan Yenmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%