• 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