Article Dans Une Revue Review of International Economics Année : 2021

Capital controls and the volatility of the renminbi covered interest deviation

Résumé

This paper examines how capital controls affect the volatility of the renminbi (RMB) covered interest deviation (CID). We find that capital controls amplify the volatility of RMB CID and the amplification effect becomes more prominent in more flexible RMB exchange regimes. Capital controls influence the volatility of interest rate differential (IRD) and forward premium (FP), two components of CID, differently, particularly during the U.S. Fed's QE era. In addition, using an error correction model, we show that, while capital controls magnify both the short-and longrun volatility of the CID and the IRD, they do not affect FP volatility.

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Dates et versions

halshs-03436233 , version 1 (19-11-2021)

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Zhitao Lin, Jinzhao Chen, Xingwang Qian. Capital controls and the volatility of the renminbi covered interest deviation. Review of International Economics, 2021, 30 (1), pp.205-236. ⟨10.1111/roie.12563⟩. ⟨halshs-03436233⟩
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