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Finance Department's Lecture

TIME: 10:00 Jun13,2018
PLACE:Room 509,Main Building 

TOPIC:The Two-Pillar Policy for the RMB
We document stylized empirical facts about China’s recent exchange rate policies. The formation mechanism of the central parity is based on a two-pillar approach that balances a trade-weighted index for the RMB (stability) and market forces (flexibility). We develop a tractable no-arbitrage model of the RMB under the two-pillar approach. With the model, we estimate the fundamental exchange rate, the probability of continuation of the two-pillar approach in the future, and the weights put on both pillars. The estimated model fits the spot rate and option prices well in-sample and forecasts future central parity and spot rates out-of-sample.
SPEAKER:Vivian Zhanwei Yue