The Interaction Effect And Their Influencing Factors Of The Onshore And HK Offshore RMB/USD Foreign Exchange Market

In recent years,with the rising of China's comprehensive national power,the deregulation and opening up of capital market and the continuous improvement of economic strength,the international status of RMB is rising.RMB exchange rate market-oriented reform and RMB internationalization strategy are also advancing.The onshore and offshore RMB market has been developing vigorously and has made gratifying achievements.Especially since August 11th,2015,the reform of RMB intermediate price forming mechanism,as of May 2017,the central bank has modified the pricing model of the RMB intermediate price 3 times,the process of reform of RMB exchange rate regime has accelerated significantly.However,at the same time,the world staged a series of major political,economic and financial events since 2015,like Britain exiting from EU,RMB adding into SDR currency basket,the FED hiking into adding interest channel,the crash of global stock market,etc.Those events may have some impact on the RMB exchange rate.Therefore,it will be of great theoretical and pratical significance to study the interaction effect of onshore and Hongkong offshore RMB foreign exchange market and their influencing fators.In order to investigate the mean spillover effects,volatility spillover effects and influencing effects of exogeous variables on the onshore and HK offshore RMB foreign exchange makets,this paper selects the CNY and CNH spot rates ranging from May 2012 to December 2017 and uses the the basic VAR model,VAR model with exogenous variables and DCC-MVGARCH model to process.The empirical results show that there's a significant bidirectional mean spillover effect between onshore and Hongkong offshore RMB foreign exchange market,but the influcence of HK offshore market is more profound,HK offshore foreign exchange market may be the pricing center of RMB.Capital market premium rate spreads,interest rate spreads,RMB join SDR and other factors had no significant effect on the onshore and HK offshore foreign exchange markets.But the VIX index has significant impact on the HK offshore market.And the reform of RMB intermediate price forming mechanism has both significant influence on the onshore and HK offshore markets,which indicated that the onshore and HK offshore market may have structural changes since the reform.There's significant volatility spillover effect between the onshore and HK offshore,and information sensitivity of the dynamic correlation coefficient has increased,the persistence of volatility has declined,which indicated that the market efficiency has improved and stability has strengthened since the reform.But it may also suggest the market may overreact when exogenous impact occurs.With the empirical results above,this paper suggests:Firstly,in order to enhance the market liquidity and expand the depth and breadth of the onshore market,the government should extend participantion subjects,improve trading products and mechanism,and enlarge the'real demand principle'to expand influence of onshore market.Secondly,monitor the exchange rate closely,take effective measures to contain speculation and prevent the risk transmission between onshore and HK offshore RMB exchange market when major risk occors.Thirdly,further improve the counter cyclical factor in the intermediate price forming mechanism.Through spontaneous regulation of counter cyclical factors as well as open market operations on both spot and swap markets,the central bank can achieve the purpose of foreign exchange rate control and cost reduction.