An Empirical Study Of The RMB Exchange Rate’s Volatility Analysis And Predict-based On The Egarch-GED Model

Under the conditions of an open economy, the exchange rate as the core variablesof a country’s economy, its acute fluctuation will have negative effect on a nation’seconomy. Since the exchange rate reform in2005, the appreciation of the RMB ratehas reached30percent, it has a tremendous impact on the internal and externalbalance of the economy in our country.After June19,2010the RMB exchange ratemore flexible and expanded its floating range. Analysis and forecast of the RMBexchange rate volatility is very important for keeping the exchange rate stable anddeveloping the exchange rate policy. Based on this, we try to use the EGARCHmodel to analysis fluctuation characteristics, and to predict the future trend of theRMB exchange rate.First, the article reviewed the important results achieved by the domestic andforeign scholars in the analysis and prediction of the exchange rate volatility, andexplained the basic theory of the exchange rate and volatility model, laid thetheoretical and methodological basis for empirical research. Second, the article madea basic qualitative study of the RMB exchange rate changed in the course of China’sexchange rate reform and analyzed the volatility characteristics of the RMB exchangerate. Finally, the article chose EGARCH model as a tool, selected the daily centralparity rate of the RMB against the U.S. dollar, the Euro and the Yen from July21,2005to Dec31,2012as a sample to analysis the volatility characteristics of the RMBexchange rate. Then the article used the EGARCH model to predict the RMBexchange rate.The results show that the RMB exchange rate has obvious leptokurticcharacteristics and does not follow a normal distribution. Bad news on the impact ofthe RMB exchange rate is greater than the good news. EGARCH-GED model canbetter fitting the RMB exchange rate yield historical data. In the aspect of forecast theEGARCH model is better than GARCH model. Based on the above analysis, it isrecommended that the Chinese government can steadily promote the appreciation ofthe RMB exchange rate to achieve a win-win situation to ease domestic inflation andto promote the internationalization of the RMB.