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Yang, Ziyu (2012) The study on the Currency Substitution under the background of RMB appreciation. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Currency substitution is an ineluctable and wild existing financial phenomenon in open economy. It can be essentially understood as the substitution of the functions of domestic currency by foreign currency, and can also be analysed from the aspect of the motive of demand for money. Among all the determinants of currency substitution, the changes in exchange rate have mainly influenced the degree of the currency substitution.

The impacts of Renminbi effective exchange rate on currency substitution between Jan. 2004 to June 2012 are analysed empirically in the paper. The Johansen test results that there is an equilibrium long run co-integration relationship among the currency substitution and RMB effective exchange rates and its volatility series. The VECM reveals a short run effect of the effective exchange rate factors on the equilibrium of currency substitution, but the elasticity is limited. The downward tendency of RMB substitution since 2004 is principally on account of an increase in the amount of money supply, which is a direct result of the continuous appreciation in RMB exchange rate. As suggestions, the monetary policy should cooperate with exchange policy, and the effectiveness of money policy will be improved if the effective exchange rate can be taking into consideration.

Item Type:	Dissertation (University of Nottingham only)
Depositing User:	EP, Services
Date Deposited:	08 Apr 2013 11:55
Last Modified:	19 Oct 2017 13:07
URI:	https://eprints.nottingham.ac.uk/id/eprint/25792

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