The Research On The Volatility Characters Of RMB Exchange Rate Around The Reform Of The Exchange Rate Regime

In recent years, the RMB exchange rate has been the focus of academic research.Before the second reform of exchange rate in 2005,the exchange rate of RMB against the US dollar had kept a stable level for along time. The People's Bank of China announced that it opened the second exchange rate formation mechanism reform on July 21,2015. The fluctuations of RMB exchange rate have become more frequent and have a increased range of volatility. As the relative price between the two currencies,the fluctuations of Exchange rate have had a profound impact on the domestic and international economic. Therefore, it is very significant for further promotion of the reform of the RMB exchange rate formation mechanism and improve financial market to analyze the RMB exchange rate fluctuation characteristics around the reform.Firstly, an overview of the situation of RMB exchange rate fluctuation has been made and conduct a comparative research of the RMB exchange rate fluctuations before and after the reform. Secondly, on the basis of the analysis of the RMB exchange rate fluctuatuion situation,explained the main reason for the RMB exchange rate fluctuations.In order to make a further analysis of the fluctuation characteristics around the reform of RMB exchange rate, this paper used the SV-N model respectively, SV-T model, SV-MN model, SV-MT model and the leverage SV model to fit the data of the RMB against the US dollar, the euro and the yen exchange rate fluctuations from July 1, 2002 to April 30, 2014.The empirical results show that, The exchange rate of RMB against the euro, the yen and the Hong Kong dollar, before the exchange rate reform, has a large fluctuation risk and stronger volatility persistence.While after the reform, there is a significantly increase of the volatility persistence,and the foreign exchange market showed a significant "leverage effect" feature. In addition, comparative analysis of five SV model fitting effect can be drawn in the fitting before the reform of the RMB against the euro yield class model SV, SV-MN model is the best, and LSV model is the worst. After fitting the reform of RMB exchange rate against the euro yields SV class model, LSV model is the best, the worst and the SV-T model. In addition, by the comparative analysis of the fitting effect of the five SV model,what can be concluded is that before the reform,the five class of SV model fitting the RMB against the euro exchange rate yield, SV-N model is the best, and the worst is LSV model. However,as to the yen,LSV model is thebest,SV-N model is the worst. After fitting the reform, RMB against the euro and yen exchange rate yields, LSV model is the best, the worst is SV-N model.Finally, combined with the results of empirical analysis, proposed some measures to deal with the reform of RMB occur after a significant change. From the national perspective, the government should improve the system of foreign exchange reserve management. On the other hand, we should improve the market pricing mechanism,cultivate and improve the foreign exchange market. From the perspective of enterprise,companies should increase exchange rate risk awareness, training of professional talents of foreign exchange management and risk management.