A Study On Volatility Characters Of RMB Exchange Rate Based On Structual Change Analysis

The RMB exchange rate volatility and its cause increasingly attract much attention. The causes of RMB exchange rate fluctuation contain not only macro-economic factors, such as financial policy, economic growth, and interest rates; but also micro-structural factors, such as the trading mechanism, private information. In addition, due to the global financial and economic integration, the fluctuations of other countries’market will also have an important influence on the RMB exchange rate volatility. Therefore, the article studies the impact of structural breaks on the fluctuation characteristics.First, the article reviewes the related paper of structure break and RMB exchange rate volatility, and then explores structural break point detection methods, the RMB exchange volatility characteristics and models, the basic statistical characteristics of RMB exchange rate are tested on this basis. Then using sequential method to test mean structure breaks, and modified ICSS algorithm to test variance structure breaks of RMB exchange rate; and analyzing the cause of structural break combine with important events. Finally, the detected structural breaks are introduced into GARCH Models, analyzing RMB exchange rate fluctuations characteristics comparatively after considering structural break points or not, and evaluating the estimated effectiveness of volatility model.The results show that the structural break is a general phenomenon in the RMB exchange rate, only RMB to U.S. dollar has mean structure break points. The RMB exchange rate volatility persistence is very high before adding structural break points, and there exists asymmetric effect in the RMB exchange rate; it can more truly reflect the characteristics of the RMB exchange rate fluctuations while adding two type structural break points, and volatility model fitting effect is better after adding two structure break points at the same time.