The internationalisation of the RMB: New starts, jumps and tipping points

This paper investigates the risk-return relations in Chinese equity markets. Based on a TARCH-M model, evidence shows that stock returns are positively correlated with predictable volatility, supporting the risk-return relation in both aggregate and sectoral markets. Evidence finds a positive relation between stock return and intertemporal downside risk, while controlling for sentiment and liquidity. This study suggests that the U.S. stress risk or the world downside risk should be priced into the Chinese stocks. The paper concludes that the risk-return tradeoff is present in the GARCH-in-mean, local downside risk-return, and global risk-return relations.

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“…3 Batten and Szilagyi (2016) provide a timely empirical analysis of the internationalization of the RMB. Chiang et al 2007).…”

Section: Introductionmentioning

confidence: 99%

An Empirical Investigation of Risk-Return Relations in Chinese Equity Markets: Evidence from Aggregate and Sectoral Data

Chiang

Zhang

2018

IJFS

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“…The financial flows among Euro‐zone members are treated as domestic and are therefore dropped, whereas the transactions among mainland China, Hong Kong, Macao, and Taiwan are categorized as cross‐border. Secondly, we consider the values of the financial flows rather than their numbers, because the former is more representative of the market condition (Batten and Szilagyi, 2016). Thirdly, we add up different message types in our benchmark estimation, and the empirical performance of each individual message type is discussed in the Online Appendix.…”

Section: Empirical Analysismentioning

confidence: 99%

Network effect and international currency

Liu,

Wang,

Woo

2024

Scandinavian J Economics

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Network effect is an important factor for the inertia and path dependence in the international monetary system. This paper explores its influence both theoretically and empirically by (a) extending the standard monetary search model to a three‐country three‐currency model with multiple transitions to clarify the network effect on currency choices; (b) empirically showing that the network effect is positive, statistically significant, and quantitatively comparable to other factors such as trade share. The empirical results hold for (a) both major international currencies and emerging currencies such as RMB; (b) various estimation specifications and sub‐samples.This article is protected by copyright. All rights reserved.

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“…Chen and Peng [5] classified variables into three categories: ancestry, acceptability, and availability, covering more specific indicators, such as economic size, trade volume, stock market capitalization, and currency volatility. Some studies included macro-and microeconomic indicators to validate the primary factors of the choice of invoicing currency, which is considered a form of currency internationalization (Goldberg and Tille [18]; Batten and Szilagyi [20]; W. Chung [21]; Li et al [22]).…”

Section: Theoretical Foundationmentioning

confidence: 99%

Does Shanghai International Financial Center Promote RMB Internationalization?

2022

Discrete Dynamics in Nature and Society

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The construction of the Shanghai International Financial Center was completed in 2020, which signaled the new age of financial reforms in China. The Shanghai International Financial Center plays a significant part in the progress of RMB internationalization. However, empirical proof of the impacts remains few. So, we conducted an empirical analysis to determine if the Shanghai International Financial Center promoted RMB internationalization effectively. To obtain robust results, we conducted regressions with Newey–West standard errors, Cochrane–Orcutt estimation, and Prais–Winsten estimation. We observed that the Shanghai International Financial Center has significant positive effects on RMB internationalization by expanding financial scale and activity. The findings give adequate evidence to support the theories advanced in prior research, and the methodology and indicators used in the study may serve as a guide for future research. We made several policy discussions of the findings regarding the continued expansion of the offshore market and capital liberalization within Shanghai.

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The internationalisation of the RMB: New starts, jumps and tipping points

Cited by 25 publications

References 31 publications

An Empirical Investigation of Risk-Return Relations in Chinese Equity Markets: Evidence from Aggregate and Sectoral Data

An Empirical Investigation of Risk-Return Relations in Chinese Equity Markets: Evidence from Aggregate and Sectoral Data

Network effect and international currency

Does Shanghai International Financial Center Promote RMB Internationalization?

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