Research On Spillover Effect Of International Oil Price And RMB Exchange Rate

Crude oil is the most important energy and strategic material of a country.The price of crude oil has been fluctuating for a long time.In particular,the establishment of crude oil futures market makes crude oil transcend the energy attribute and have certain financial attribute.The oil market is more and more closely related to the macro economy and financial market.As an important indicator of macro economy,the exchange rate is also closely related to crude oil.Therefore,it is of great theoretical and practical significance to explore the spillover relationship between international oil price and RMB exchange rate.In the first part of the empirical study,the spillover index proposed by Diebold and Yilmaz(2009,2012)is used to investigate the return spillover of international crude oil futures price and RMB exchange rate in the three major markets(CNY market,NDF market and CNH market).The second part of the empirical study uses the spillover measure to investigate the volatility spillover of crude oil and three exchange rates.Combined with the asymmetry spillover measurement model proposed by Baruník et al.,the asymmetric volatility spillovers between crude oil and exchange rates are investigated.In this part,we further investigate the dynamic connectedness between three identified structural oil price shocks and exchange rates.The three oil shocks are disentangled using the recent procedure of Ready(2018),which allows one to identify oil supply,oil demand,and oil risk shocks.The last part of the empirical study is a further analysis,using impulse response function to analyze the impact of us economic policy uncertainty on the spillover relationship between oil price and exchange rate.The results show that there are return spillover and volatility spillover between oil market and RMB exchange rate market,but oil is the absolute contributor to the spillover regardless of return spillover or volatility spillover,and oil is the recipient of the spillover in most of the three exchange rate markets.After the "8.11 exchange rate reform",the average spillover level of the oil market to the exchange rate decreased on the whole,but the average spillover level of the exchange rate market strengthened.Both return spillover and volatility spillover show time variability,in which the change of return spillover is more obvious,and volatility spillover is stable on the whole,but there are mutations and the mutation effect is strong.There are differences in the spillover relationship between the three exchange rate markets and oil price.The external volatility spillover of exchange rate market presents obvious asymmetry,and the negative volatility dominates the positive volatility.After the decomposition of oil price shock,it is found that the dominant shock is different in different stages,but on the whole,oil demand shock is dominant,followed by risk shock.Impulse response shows that the oil price exchange rate volatility spillover level decreases first and then increases continuously when economic policy uncertainty is applied to a shock,and the offshore market and oil price volatility spillover level responds to the shock faster and is more affected than the onshore market.