The Dynamic Relationship Between Onshore And Offshore Renminbi Exchange Rate

Post 2008 global financial crisis,China government has taken various conductive measures to promote its official currency Renminbi(RMB)internationalization,and receive affirmation of the success of China's economic development and results of the reform and opening up of the financial sector as the milestone of joining SDR.However,the RMB internationalization is facing new challenges and opportunities under the current situations.At the meanwhile,it is especially important to understand the interactions of onshore and offshore RMB during the progress.The thesis investigates the Renminbi behaviors including the dynamic relationships and pricing differential between the onshore and offshore markets.We employed the rolling analysis to examine the links as time varying and yield some striking findings.The interactions between exchange rate and foreign exchange reserve also draw meaningful conclusions.In summary,we have following conclusions:(1)The RMB internationalization prominently increase the lead-lag relationship from offshore to onshore markets,but not vice versa.(2)Offshore RMB markets,including OTC and exchange,play the major adjustment role when emerging deviations to the long-term equilibrium with onshore market.(3)The long-term equilibrium decreases between exchange rate and foreign exchange reserve as RMB internationalization,which imply the exchange rate is not the only consideration of determining foreign exchange reserve.This thesis provides several contributions.First,employing rolling analysis to derive a robust economic implication on the dynamics.Second,the examination scope covers RMB OTC and exchange markets together with the time period of the significant moves of RMB globalization and liberalization,which bring comprehensive understandings on the interactions.Last but not least,the result of empirical studies shed light on the policy making and further studies as the new era of RMB internationalization.