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Exchange rate flexibility in China : measurement, regime shifts and driving forces of change.

Dixon, R. and Zhang, Z. and Dai, Y. (2016) 'Exchange rate flexibility in China : measurement, regime shifts and driving forces of change.', Review of international economics., 24 (5). pp. 875-892.


With an emphasis on government intervention that hinders market forces in currency movements, this paper presents a nuanced investigation of the degree and dynamics of flexibility in China's exchange rate regime. A high-frequency data model is developed to more accurately detect the extent to which the Chinese currency is market-driven. This indicator is then utilized in a Markov switching model to examine shifts in RMB regime flexibility. The results suggest a moderate increase in exchange rate flexibility since the 2005 reform. Additionally, two switching states are captured, and possible driving factors are discussed.

Item Type:Article
Full text:(AM) Accepted Manuscript
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Publisher statement:This is the accepted version of the following article: Dixon, R., Zhang, Z. and Dai, Y. (2016), Exchange Rate Flexibility in China: Measurement, Regime Shifts and Driving Forces of Change. Review of International Economics, 24(5): 875-892, which has been published in final form at This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Date accepted:22 February 2016
Date deposited:26 February 2016
Date of first online publication:19 April 2016
Date first made open access:19 April 2018

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