How has the Chinese Yuan Evolved since the 2005 Reform?

This study employs the bootstrap method to explore the evolution of the Chinese yuan. We use the following three random walks to characterize the evolution of the yuan: an IID-parameterized random walk, an ARCH(3)-parameterized random walk, and a GARCH(1,1)-parameterized random walk. To proceed, we use the bootstrap method to generate 10,000 artificial yuan series from each random walk and compute the return from the trading rule (i.e., moving average or trading range break) for each of the 10,000 artificial yuan series. Then, we construct a 95% percentile interval with these 10,000 returns to determine if the interval contains the return computed from the actual yuan series. Using daily exchange rate data from 22 July 2005 to 19 July 2019, our results show that, of the three random walks, the GARCH(1,1) random walk best portrays the yuan since the 2005 exchange rate system reform.