DocumentCode
3366097
Title
Some Empirical Observations on the Spot and the Forward Exchange Rates in China
Author
Sun, Dong ; Li, Tao
Author_Institution
Sch. of Bus. Manage., North China Electr. Power Univ., Beijing
fYear
2008
fDate
4-6 Nov. 2008
Firstpage
639
Lastpage
643
Abstract
In this article we attempt to reexamine the familiar relationship between forward rate and future spot rate using RMB-USD on daily basis. By means of using cointegration techniques, we find that the RMBpsilas future spot rate and the current forward exchange rate have a long stable relationship and Granger causality testing proved that RMBpsilas spot exchange rate can be treated as an exogenous. However, cointegration regression and Wald testing imply that the forward rate does not fully reflect all information available to economic agents. In other words, our investigations reveal that the FRUH (forward rate unbiasedness hypothesis) does not hold in Chinese foreign exchange rate market where international capital does not move freely. For the entire sample period, the evidences indicate that even though the forward rate has an impact in predicting the future spot rate in a long-run, however, enough variability remain to make the predications a suspect.
Keywords
foreign exchange trading; macroeconomics; regression analysis; testing; China; Granger causality testing; Wald testing; cointegration regression; forward exchange rates; Conference management; Economic forecasting; Energy management; Engineering management; Exchange rates; Fluctuations; Research and development management; Risk management; Sun; Testing; RMB; cointegration; forward rates; spot rates;
fLanguage
English
Publisher
ieee
Conference_Titel
Risk Management & Engineering Management, 2008. ICRMEM '08. International Conference on
Conference_Location
Beijing
Print_ISBN
978-0-7695-3402-2
Type
conf
DOI
10.1109/ICRMEM.2008.17
Filename
4673305
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