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Although China has claimed since 2005 that it will move towards a more market-oriented system of managing its foreign exchange, it has remained, in part, a managed economic system. This chapter examines the relative importance of fundamentalist, chartist and currency arrangements in determining the RMB exchange regime using both traditional linear and non-linear artificial intelligence models. We find that the emphasis on the US dollar as a reference currency has declined. Fundamentalist forces are becoming strong determinants of the currency exchange. The genetic programming approach is among the best performing in minimizing forecasting error.

This chapter examines exchange rate options for East Asian countries, taking into account their real economic linkages as well as their international financial relations. Particular consideration is given to possible exchange rate cooperation within the region. For this purpose, the literature on the optimal peg is reconsidered and subsequently extended to include a country's international financial asset and liability situation. That is, instead of focusing solely on nominal or real effective exchange rates, the chapter proposes a blend of “real” and “financial” exchange rates for analyzing “optimal” exchange rate policy.

The renminbi (RMB) has evolved in four phases since its mid-2005 unpegging from the US dollar. After a year's transition, the RMB's effective exchange rate traded for two years within narrow bands around an appreciating trend. That is, the RMB behaved as if it were managed to strengthen gradually against trading partners’ currencies. This experiment was interrupted in mid-2008 and the RMB stabilized against a strong dollar amidst the global financial crisis. If Chinese policy were to return to effective currency stability and other East Asian countries were to pursue similar policies, regional currency stability would be enhanced. That would create more favorable conditions for an evolution towards monetary cooperation.

This report examines the recent developments and trends relating to the Chinese government’s policy actions and the key issues that determine the choice of exchange rate regime in China. An up-to-date “stock-take” of the economic indicators is conducted to determine what is suitable for China in light of the rapidly evolving nature of the world economy and trading environment. This paper discusses the role of economic development, trade competitiveness, capital flow, foreign exchange reserve, and RMB internationalization in the determination of the RMB exchange rate regime.

This research uses an inductive approach to gain a fine-grained understanding of the complex, multifaceted aspects of China’s exchange rate policy. A combination of statistical analysis, including basic descriptive statistics, trend analysis, and a correlation study are used to explore the association between various indicators and their implications. The report also draws on analysis of a broad range of data sources and the work of numerous researchers and research institutions.

A more flexible exchange rate regime can play a complementary role towards rebalancing the Chinese economy by raising the buying capacity of families, rebalancing growth towards domestic consumption, and reducing reliance on export. China’s price elasticity of the demand for exports was relatively low that the appreciation of the Chinese currency has almost no influence on optimizing China’s trade balance. A more flexible two-way flow in RMB would be suitable under the current cash flow scenario in China. Reduced intervention will facilitate further adjustment in reserves. Lastly, in the early stage of RMB internationalization, flexibility in the exchange rate is one of the factors that influences its growth prospect as a reserve currency.

The findings and conclusion are derived based on the latest empirical information, statistical evidence, and economic theory. This inquiry does not build on a theory, and aims to neither verify a theory, nor test hypotheses. Rather, it aims to demonstrate, assess, and explain significant roles that various economic factors play in shaping the future exchange rate regime of China.

This paper presents the rationale behind a more flexible two-way exchange rate, by assessing the latest empirical data and theoretical explanation that support such a move.

We investigate fluctuations in the nominal effective exchange rates (NEERs) of East Asian currencies and the Asian monetary unit (AMU), which is computed as a weighted average of East Asian currencies during the global financial crisis. We find that NEERs were more stable for countries that continued to follow a currency basket system during the global financial crisis.

Furthermore, we investigate the relationships among NEERs, AMU, and AMU deviation indicators, which indicate the extent of the deviation in the exchange rate of each East Asian currency from a benchmark rate given in terms of the AMU. By comparing NEERs with a combination of AMU and AMU deviation indicators, we find that there is a strong relationship between them, both before and after the global financial crisis. These results indicate that a coordinated exchange rate policy aimed at stabilizing the AMU deviation indicators will be effective in stabilizing the NEERs of East Asian currencies. In this respect, the AMU deviation indicators, which indicate intraregional exchange rates among East Asian currencies, play a crucial role.

Because NEER trade weights are widely similar among East Asian currencies, a policy aimed at stabilizing a home currency against its NEER may lead to a coordinated exchange rate policy without a common consensus among East Asian countries. In the future, however, coordinated monetary policies should be considered along with coordinated exchange rate policies.

The purpose of this paper is to determine whether foreign exchange markets in India have become more efficient over time. There were two major developments in India’s foreign exchange market since the 1980s: first, a shift in foreign exchange management regime from a basket peg to a free float; and second, a rapid phase of economic liberalization since the mid-1990s. The paper attempts to find out whether the market efficiency of foreign exchange markets is affected by these developments. The paper mainly uses the well-known Hurst exponent calculated through corrected empirical R over S analysis to determine whether the exchange rates possess long memory. The robustness of the method is tested by calculating the Hurst exponent through two other prevalent methods in the literature.

The authors apply the corrected empirical Hurst exponent which employs the Anis Lloyd correction with the modification suggested by Weron. The sensitivity of the results is then tested by replicating the calculations using the detrended fluctuation analysis and Robinson’s method.

All the methods show that: first, there is no significant change in the overall efficiency of the foreign exchange market vis a vis the US$ for the time period from 1980 to 2017. Second, neither regime shifts nor calculations over sub-time periods is able to identify significant change in the efficiency level of the market for the US$ exchange rate. Third, efficiency of different exchange rate markets are different over the time period 1999–2017. The US$ market has unequivocally more long run memory compared to the GBP, Yen and EURO markets. Fourth, the results are robust to the method used for calculations.

Does the efficiency of asset markets evolve over time? This paper attempts to answer this question. In the process, the paper studies the effect of regime shifts and progressive globalization on the ability of the market to internalize information.

An impassioned debate has been on in the academic and policy circles regarding the undervaluation of the renminbi (RMB) yuan. This issue has emerged as one of the most contentious and thought‐provoking in the discipline of international finance. That it is undervalued is widely acknowledged. With China's emergence as an economic superpower of the future, this debate no doubt has considerable merit and ramifications. This article looks sang froid at its undervaluation, 2005 revaluation and when should the RMB yuan be further appreciated. As the Chinese economy picks up further growth momentum, the currency appreciation is expected to accelerate. This article also examines the implications of further appreciation of the RMB yuan on the Chinese and Asian economies as well as its plausible impact over the bilateral imbalances between China and US economy.

Purpose – The major question posed in this paper is whether public finance management (PFM) reforms undertaken by development partners (DPs) and the Ministry of Health (MOH) in Ghana were to find solutions to the many PFM challenges or it was merely a façade to pursue latent political interest?

Methodology – Study information was gathered via a desk review of major PFM policy documents, procedures, manuals, guidelines, and findings of commissioned studies covering the period under review. Information generated from the desk review was triangulated via extensive interviews with a sample of policy makers from MOH and DPs.

Findings – The findings suggest that MOH and DPs pursued reforms mostly to address the PFM challenges in the sector. Additionally, the study finds questionable the attitude and posture of the two actors and calls for further investigations to unearth what the said attitude and posture may imply in terms of intentions.

Originality/value – The findings raises fundamental question regarding public sector – DPs collaborations in executing reforms. This could open up new frontiers for further research to better understand DPs/public sector collaboration in the implementation of reforms.

Limitations – The sample used for this study may constrain generalization to other jurisdiction. This limitation does not in any case invalidate the conclusions arrived at.

The purpose of this paper is to examine the effects of foreign trade liberalization and trade reforms on the process of structural upgrading, and explore the extent to which they provide impetus for exports.

This paper accounts for trade liberalization dates, cumulative years in open regime, and the density of 1,006 products in the patterns of comparative advantage for 132 countries from 1975 to 2000. The effects of trade liberalizations and trade reforms in open regime on future export performance are estimated by using various empirical strategies.

This paper finds that the speed of moving from simple poor-country goods to rich-country goods in export depends not only on having a route to nearby goods of increasingly higher value, but also on the increase in the cumulative years in open regime. In particular, a 1 percent change in the relatedness across products with trade reform in open regime increases the probability of exporting a new product by 2.0 percent more.

A contribution of this paper is that it measures the extent to which trade reform in open regime affects the evolution of comparative advantage, even after taking account of the role of relatedness of exported products as in the Hausmann and Klinger (2006, 2007). In this paper, empirical findings of a comprehensive product level cross-country time-series data analysis may contribute to generalize the role of trade reform on structural upgrading not only for a pro-competitive export country like Korea but also for a typical developing country.

The purpose of this paper is to examine the regime shifts and stock market volatility in the stock market returns of seven emerging economies popularly called as “BRIICKS” which stands for Brazil, Russia, India, Indonesia, China, South Korea and South Africa, over the period from February 1996 to January 2012 by applying Markov regime switching (MS) in mean-variance model.

The authors apply MS model developed by Hamilton (1989) using its mean-variance switching framework on the monthly returns data of BRIICKS stock markets. Further, the estimated probabilities along with variances have been used to calculate the time-varying volatility. The authors also examine market synchronization and portfolio diversification possibilities in sample markets by calculating the Logit transformation based cross-market correlations and Sharpe ratios.

The applied model finds two regimes in each of these markets. The estimated results also helped in formulating the asset allocation strategies based on market synchronization and Sharpe ratio. The results suggest that BRIICKS is not a homogeneous asset class and each market should be independently evaluated in terms of its regime-switching behavior, volatility persistence and level of synchronization with other emerging markets. The study finally concludes that Russia, India and China as the best assets to invest within this emerging market basket which can be pooled with a mature market portfolio to achieve further benefits of risk diversification.

The study does not provide macroeconomic and financial explanations of the observed differences in dynamics among sample emerging stock markets. The study does not examine these markets under multivariate framework.

The results highlight the role of regime shifts and stock market volatility in the asset allocation and risk management. This study has important implications for international asset allocation and stock market regulation by way of identifying and recognizing the differences on regimes and on the dynamics of the swings which can be very useful in the field of portfolio and public financial management.

The paper is novel in employing tests of MS under mean-variance framework to examine the regime shifts and volatility switching behavior in seven promising BRIICKS stock market. Further, using MS model, the authors analyze the duration (persistence) of each identified regime across sample markets. The empirical results of MS model have been used for making portfolio allocation strategies and also examine the synchronization across markets. All these aspects of stock market regime have been largely ignored by the existing studies in emerging market context particularly the BRIICKS markets.