Original scientific paper
https://doi.org/10.1080/1331677X.2019.1636697
Can onshore spot market progress influence offshore N.D.F. market development for the C.N.Y?
Chi-Wei Su
; School of Economics, Qingdao University, Qingdao, China
Kai-Hua Wang
; Department of Finance, Ocean University of China, Qingdao, China
Heng-Guo Zhang
; School of Economics, Ocean University of China, Qingdao, China
Rui Nian
; College of Information Science and Engineering, Ocean University of China, Qingdao, China
Abstract
This study utilises a time-varying wavelet analysis to examine the relationship between the onshore spot market and the offshore non-deliverable forward (N.D.F.) market of the Chinese Yuan (C.N.Y.). Given the presence of structural changes in the two markets, we did not find any stable causality during the sample period. However, in some sub-samples, we found that there is a strong nonlinear causal relationship running from the onshore spot market to the offshore N.D.F. market. Ties between the two markets are closer after the widening of the onshore trading band, first in April 2012, second in March 2014 and again in August 2015. The onshore spot market is heavily influenced by interventions by the People’s Bank of China (P.B.C.). These findings imply that offshore N.D.F. market development is not divorced from onshore development, as developments in the onshore spot market influence the offshore N.D.F. market. The results show that the exchange rate markets for the C.N.Y. are not efficient. Thus, to successfully internationalise the C.N.Y., financial expansion of the onshore spot market should keep pace with the growing offshore N.D.F. market to minimise destabilisation of the C.N.Y.
Keywords
onshore and offshore markets; spot and forward markets; wavelet analysis; frequency domain; time domain; time-varying causality
Hrčak ID:
228823
URI
Publication date:
22.1.2019.
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