## Wednesday, March 22, 2006

### Is something happening with the Chinese Renminbi?

A visual inspection of the USD-CNY rate suggests that in recent days, there has been a bit more volatility: (This picture is taken from Yahoo finance, where you can tinker with the parameters further). I just updated our Monitoring the Chinese Currency Regime' page and find that while visually it looks like something has changed, one can't yet reject the null that nothing has changed: What is going on here is that the months of August, September and October are used as the history period. From 1 November onwards, the monitoring period' starts. The red line shows the threshold for rejection and the black line shows the empirical test statistic. When the black line crosses the red line, we will be able to say that the Chinese currency regime has changed when compared with that prevalent in August 2005 - October 2005. So far, the situation seems to be one of running on the same regime. What I find particularly fascinating is that a three-month history period has shed light on the following five months (November 2005 till now). Perhaps this is a moving target, and the dates matter greatly. The Yahoo finance data goes till 20 March. The data we use for the paper, which is from the US Federal Reserve website, goes till 17 March.

LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.