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<p>This study empirically examines whether Asian economies experienced an increase in real exchange rate (RER) convergence toward the Chinese Renminbi (RMB) following reforms to the RMB exchange rate regime, utilizing a time-varying parameter error-correction model (TVP-ECM). Additionally, we explore whether RMB-related factors influence these regional convergence patterns through a time-varying parameter dynamic factor model (TVP-DFM). Asian RERs exhibited a faster convergence speed toward the RMB than toward the U.S. dollar (USD). However, the faster convergence speed toward the RMB was mainly explained by idiosyncratic country factors, especially during the period of the market-oriented exchange rate policy from September 2015. In contrast, the Asian RER convergence toward the USD became dominated by global and regional factors when China adopted the market-oriented exchange rate policy in September 2015. Thus, the RMB’s increasing fluctuations against the USD from September 2015 likely prevented the RMB’s stabilizing role in Asian integration.</p>

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Growing convergence of Asian real exchange rates toward the Chinese Renminbi?

  • 期刊论文

  • 发表日期：

    2026年4月7日

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  • Sheue-Li Ong,
  • Kiyotaka Sato

摘要

This study empirically examines whether Asian economies experienced an increase in real exchange rate (RER) convergence toward the Chinese Renminbi (RMB) following reforms to the RMB exchange rate regime, utilizing a time-varying parameter error-correction model (TVP-ECM). Additionally, we explore whether RMB-related factors influence these regional convergence patterns through a time-varying parameter dynamic factor model (TVP-DFM). Asian RERs exhibited a faster convergence speed toward the RMB than toward the U.S. dollar (USD). However, the faster convergence speed toward the RMB was mainly explained by idiosyncratic country factors, especially during the period of the market-oriented exchange rate policy from September 2015. In contrast, the Asian RER convergence toward the USD became dominated by global and regional factors when China adopted the market-oriented exchange rate policy in September 2015. Thus, the RMB’s increasing fluctuations against the USD from September 2015 likely prevented the RMB’s stabilizing role in Asian integration.