Research On The Spillover Effect Between RMB Onshore And Offshore Market

With the rapid development of China's economic strength,the Central Bank has imposed a series of exchange rate reform policies,in order to accelerate the process of internationalization of the RMB,not only for improvement of the RMB exchange rate pricing mechanism,but for promoting the development of RMB offshore market.The development of the RMB offshore market is an important part of the process of internationalization of the RMB.The exchange rate reform policy has led to obvious fluctuation of the RMB offshore and the onshore market,the relationship between the RMB market has become more complicated as well.Therefore,when the exchange rate policy changes,it is of great significance to study price spillover effect between different RMB market and the information transmission relationship,especially whether the pricing power of the offshore and the onshore exchange rate market is transferred.in the present situation,this paper focuses on the changes in spillover effects between different RMB markets under different policy areas.These paper combing the previous research results on the onshore and offshore renminbi market spillover relationship,based on the theory of interest rate parity,the efficient market hypothesis of foreign exchange market and information transmission mechanism.First,we overview offshore and RMB onshore market development,and analysis the reason from theoretical level of the type,influencing,and consequences of overflow,focusing on the impact of exchange rate reform policy on the spillover effect between offshore and RMB onshore market;second,the mean and variance characteristics of the RMB offshore and onshore exchange rate are analyzed by descriptive statistics of the sample data.We divided sample into seven stages according to the exchange rate reform policy,using vector autoregressive model,Granger causality test and GARCH-BEKK model,we study the empirical research on market returns spillover effect and the volatility spillover effect.The results show that,there is return and volatility spillover effect between RMB offshore and onshore market and one market price will have an impact on other markets.The direction of this impact is changing with reform policies and the process of RMB internationalization.With the deepening of the process of reform,the implementation of reform policies affect the exchange of offshore and onshore market pricing power,the RMB offshore market are dominant in two aspects of return and volatility spillover,onshore RMB market has lost pricing power and volatility source position.Finally,this paper,based on the empirical conclusions,list several enlightenment on the balance the relation of the offshore market and onshore market and the future development of the offshore market,we hope the paper can provide valuable guidance making exchange market policy and the process of RMB internationalization.