Sustainable exchange rates in China: Is there the heterogeneous effect of economic policy uncertainty?

Liming Chen, Ziqing Du, Aaron Tan

Research output: Contribution to journalArticle

Abstract

This study is to investigate the heterogeneous effect of economic policy uncertainty (EPU) on the exchange rate volatility of China using quantile regression for the period Jan 2003–Jan 2019. This paper significantly contributes to the empirical literature by taking into account the effect in individual and distributional heterogeneity and exploring the transmission mechanism of heterogeneity. The results demonstrate that, first, EPU from different countries have a heterogeneous impact on China’s exchange rate volatility both direction as well as distribution. Second, this paper further assesses the EPU transmission mechanism of bilateral trading and interest rate difference is mixed. These results provide policymakers with critical policy recommendations that contribute to the reduction of the exchange rate volatility and ensure stable economic development in China.
Original languageEnglish
Pages (from-to)346-363
Number of pages18
JournalGreen Finance
Volume1
Issue number4
DOIs
Publication statusPublished - 22 Nov 2019

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Policy uncertainty
Economic policy
Exchange rates
Exchange rate volatility
China
Transmission mechanism
Interest rates
Economic development
Bilateral
Quantile regression
Politicians

Cite this

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title = "Sustainable exchange rates in China: Is there the heterogeneous effect of economic policy uncertainty?",
abstract = "This study is to investigate the heterogeneous effect of economic policy uncertainty (EPU) on the exchange rate volatility of China using quantile regression for the period Jan 2003–Jan 2019. This paper significantly contributes to the empirical literature by taking into account the effect in individual and distributional heterogeneity and exploring the transmission mechanism of heterogeneity. The results demonstrate that, first, EPU from different countries have a heterogeneous impact on China’s exchange rate volatility both direction as well as distribution. Second, this paper further assesses the EPU transmission mechanism of bilateral trading and interest rate difference is mixed. These results provide policymakers with critical policy recommendations that contribute to the reduction of the exchange rate volatility and ensure stable economic development in China.",
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Sustainable exchange rates in China : Is there the heterogeneous effect of economic policy uncertainty? / Chen, Liming; Du, Ziqing; Tan, Aaron.

In: Green Finance, Vol. 1, No. 4, 22.11.2019, p. 346-363.

Research output: Contribution to journalArticle

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T2 - Is there the heterogeneous effect of economic policy uncertainty?

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AU - Du, Ziqing

AU - Tan, Aaron

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KW - Economic policy uncertainty

KW - Heterogeneity

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