Characteristics Analysis Of The Rmb Exchange Rate Fluctuations Based On Bayesian Method

Exchange rate is the ratio of mutual exchange between currencies. With the fast development of global economy, exchange rate becomes a more and more important leverage tool. As a result, how to reasonably judge and analyze exchange rate volatility comes to be a significant research topic. Since July 2005, the exchange rate reform of our country attracted board attention. American subprime mortgage crisis in 2008 turned to be a serious global financial crisis. As a country highly relied on foreign trade, it was rather important to make research about the volatility situation of USDCNY and EURCNY before and after the exchange rate reform and financial crisis. This paper aimed at solving above problems and finally gets satisfactory conclusion.Based on Bayesian method, we used Smooth Transition Autoregressive Threshold Generalized Autoregressive Conditional Heteroscedasticity(STAR-TGARCH(1,1)) model family to analyze the characteristics of the RMB exchange rate fluctuation before and after the exchange rate reform and financial crisis. According to research:(1) the exchange rate of USDCNY kept the same before the exchange rate reform; but the exchange rate after the reform reached the steady condition of GARCH and had a significant GARCH effect and a negative leverage effect. Moreover, the exchange rate of EURCNY reached the steady condition of GARCH no matter whether before or after the exchange rate reform, but the adjustment speed of exchange rate after the reform was higher than the one before. Besides the exchange rate of EURCNY all had a negative leverage effect before and after the reform, but the latter one was stronger than before. According to this, we can saw the obvious effect of the rate reform because it effectively motivated the flexibility of market.(2) the exchange rate of USDCNY kept the same before the financial crisis revealed significant GARCH effect, but only the one after financial crisis reached the steady condition of GARCH. The exchange speed of USDCNY was lower than the latter one, but both exchange rate of USDCNY had leverage effect. However, both the exchange rate of EURCNY before and after financial crisis all reached the steady condition of GARCH.Then the latter exchange speed of EURCNY was lower than before, but all had a similar leverage effect. Based on this result, we knew our exchange rate market grew gradually perfect and macro-control policy had a significant effect which contributed a larger exchange rate space.(3) Based on research result, this paper raised relative useful policy suggestions which will be conducive to policy formulation.Main innovation points in this paper:(1) we researched on USDCNY and EURCNY before and after the exchange rate reform and financial crisis, established Smooth Transition Autoregressive Threshold Generalized Autoregressive Conditional Heteroscedasticity(STAR-TGARCH(1,1)) model family, analyzed volatility characteristics of exchange rate and made comparative analysis.(2) Based on Bayesian method, we established model and made parameter estimation.