The anatomy of a peg: lessons from China’s parallel currencies by Ricardo Reis

Join us for this week's Macroeconomics Research Seminar, Spring Term 2026.

Ricardo Reis, from the London School of Economics and Political Science, will present this week's Macroeconomics seminar on The anatomy of a peg: lessons from China’s parallel currencies.

Abstract

A parallel offshore currency coupled with capital controls is an effective mechanism for policymakers to create a wedge between domestic and foreign returns and to intervene in the exchange rate and the current account. This paper shows this in a model and finds evidence for these forces in the Chinese experience of internationalizing the renminbi, which has two currencies circulating: the mainland CNY and the offshore CNH. Exploiting a rare instance of exogenous, transitory increases in the supply of money, we find causal evidence that these increases depreciate the exchange rate, and, with an instrument for shocks to money demand, we find that the scarcity of liquidity and the exchange rate move hand in hand. We quantitatively decompose the relative contributions of monetary and liquidity policies in managing the onshore-offshore peg, concluding that liquidity policies are central in an integrated policy framework.

This seminar will be held on campus in 5B.307 at 1.30pm on Tuesday, 20 January 2026. This event is open to all levels of study and is also open to the public. To register your place, please contact the seminar organisers.

This event is part of the Macroeconomics Research Seminar Series.