The Anlysis Of The RMB Exchange Rate Base On MS-GARCH Models

The exchange rate is a very important variable in the international finance field. It determines not only the inner equilibrium of the economy but also the outer equilibrium. So the study of the dynamic behavior of the exchange rate is very important. Recently the reform of RMB exchange rate is going on, many people paid attention to it. And also our exchange rate has more and more great pressure to rise, in this condition, the research of the exchange rate is very necessary and useful. In the last 10 years, many people studied the volatility of financial time series data with the Markov-Switching Garch models. For it can reveal the impact to the fluctuations of time series by the unobservable variables which underlying the observable variables. So this paper studied the RMB exchange rate by the Markov-Switching Garch models.Firstly, we reviewed some international exchange rate theories, then briefly introduced several exchange rate fluctuations nonlinear models, especially the background and theory of the MS-Garch models. On basis of that, we used MS-Garch (1, 1) models and ordinary Garch (1, 1) models to describe dynamic behavior of the RMB exchange rate. Through the estimate of these models and the fit of the sample data, we found that the RMB exchange rate is nonlinear dynamic and asymmetric. At the same time, the empirical results indicated that Ms-Garch models are more suitable for the dynamics research of the current and future regime of RMB exchange rate.