Jonathan Fortun holds a Master in IR-Economics (Kobe University, Japan); an M.A. in Finance and a B.A. Magna Cum Laude in Financial Engineering, both from universities in Bolivia. He possesses over five years of experience on financial markets and economic analysis in three continents working with diverse stakeholders such as the InterAmerican Development Bank, the Bolivian Stock Exchange and financial institutions in Japan. Having been born during one of the worst hyperinflation processes in economic history has marked Jonathan for life and consequently attracted him to research about monetary economics, financial structure and resource dependency. After spending the last 6 years studying and working in East Asia he has come to SAIS to continue his training in International Economics and Finance.
“An Integrated Analysis of Currency Diversion: The Case of CNH vs CNY”
The recent development of an international role for the Chinese currency renminbi has been tied to the liberalization of the Chinese capital account. The Chinese government has opted for a selective easing of mainland capital controls and at the same time, it has expanded the range of cross border transactions denominated in renminbi. These strategies have led to a relative rapid growth in the use of renminbi for onshore deposits, for the issuance of fixed income instruments and general lending operations in Hong Kong SAR. Given this context, it is imperative to analyze how far advanced is the internationalization and acceptance of the renminbi outside mainland China. This question is approached by analyzing how effectively is the onshore use of the currency is being accepted as a substitute of onshore currency, using a Threshold Autoregressive (TAR), as a means of robustness. I also provide an analysis of the spread through a Moving Average Convergence Divergence (MACD) model. The findings show that for around 40% of the time, a statistically consistent divergence (arbitrage opportunity) is found in the spot market of onshore-offshore renminbi. For the case of the future market of onshore-offshore renminbi, the tests show that there is a significant consistent divergence around 60% of the time, conclusion confirmed by the MACD approach.