TITLE:
The Jump Dynamics of the Industry-Specific Nominal Effective Exchange Rate of RMB and the Impact of Major International Currencies on It—An Empirical Study Based on the ARJI Model
AUTHORS:
Yuqi Wang
KEYWORDS:
Exchange Rate Risks, INEER Returns, GARCH, Jump Intensity
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.7 No.1,
March
28,
2018
ABSTRACT: In this
paper, the Autoregressive Jump Intensity (ARJI) model with time-varying jumps
is used to measure the daily exchange rate volatility and jump intensity of 13
Chinese manufacturing segments from January 1, 2001 to June 30, 2017. The
statistical characteristics are analyzed and compared. We further explore the
impact of international major payment currencies’ volatility on the
industry-specific nominal effective exchange rate (INEER) risks for various
industries in China. First, the results show that there are certain differences
in exchange rate fluctuation and jump dynamics between different industries.
The exchange rate volatility and jump intensity for paper, non-metal and metal
industries are small, while for petroleum, rubber, electrical machinery and
other industries are larger. Second, the U.S. dollar, German mark and Japanese
yen have significantly different effects on exchange rate fluctuations and jump
risks in various industries, and the degree of impact is weakened in turn.
Finally, the analysis of the sub-sample shows that after the financial crisis,
the impact of dollar and yen on the fluctuations of INEER for most industries
has declined significantly, and the impact of mark has generally increased.