Trade-Finance Arbitrage, Commodity Prices Change and the Effect of Monetary Policy
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| Title | Trade-Finance Arbitrage, Commodity Prices Change and the Effect of Monetary Policy
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| Author | Zheng Zunxin, Wang Qi and Xu Xiaoguang |
| Organization | College of Economics, Shenzhen University |
| Email | zxzheng@szu.edu.cn，wqcarmen@gmail.com，xxg_sz@163.com。 |
| Key Words | The Effect of Cost-of-carry; The Effect of Trade-finance Arbitrage; Commodity Prices Change; The Effect of Monetary Policy |
| Abstract | In recent years, trade-finance arbitrage activities have been hyperactive with no systematic theoretical framework and effective countermeasures in place, in order to observe the commodity prices change and the effect of monetary policy from a new perspective, we try to take trade-finance arbitrage activities into consideration to establish the equilibrium framework of arbitrage storage based on the traditional theory of storage. And through the idea of effect demonstration, a new method is provided to diagnose the active level of trade-finance arbitrage activities. According to the empirical results, trade-finance arbitrage activities across borders are more active than those within; When domestic market interest rate rise above the equilibrium level, the interest spread is likely to be widen, so the effect of trade-finance arbitrage is magnified; The suppression effects of current depreciation of RMB and government regulation are very limited; If contractionary monetary policy is implemented, the effect of trade-finance arbitrage is likely to strengthen the undershooting effect of commodity market. |
| Serial Number | WP968 |
| Time | 2015-12-01 |
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