The Study On The Dynamic Interrelation Among RMB On-shore And Off-shore Markets

In the process of RMB internationalization,the RMB exchange rate market-oriented reforms and the establishment of the The offshore RMB center in Hong Kong as the most important strategic steps,has become one of the hottest topics in financial market.Since the launch of RMB Cross-border Trade Settlement in July 2009,the offshore Market has achieved rapid expansion and formed his own offshore foreign exchange benchmark price.The exchange differences between onshore and offshore market exists constantly,which lead to a wide range of foreign exchange arbitrage between offshore and onshore market.After the reform of the quotation mechanism of RMB middle price on August 11,2015,the strong depreciation of the offshore RMB pulled exchange differences up to 2000 points,which lead to a large-scale capital outflow and form a huge depreciation pressure in onshore market,the central bank has to use foreign exchange reserves and window guidance to intervene offshore market in order to raise the cost of short selling.Despite the market intervention of central bank has narrowed exchange differences,the market has raised a strong concern about the position of offshore RMB market.The relationship between offshore and onshore market has once again aroused focus of the financial field.Therefore,this paper take three major foreign exchange markets-Onshore RMB market(CNY),Offshore RMB Market in Hong Kong(CNH)and Offshore Non-deliverable Forwards market(NDF)-as the research object,attempts to explore changes in the relationship between RMB price in offshore and onshore markets in recent years.This paper reviews the development of three foreign exchange market and analyses the relevant theory among foreign exchange markets and information flow mechanism between the onshore and offshore market.Then based on changes in the foreign exchange market policy to divide the time interval,in the VAR model basis,through the Granger causality test and generalized autoregressive conditional heteroskedasticity(GARCH)model,this paper conducts a empirical research on the mean and volatility spillover effect among the RMB price on three foreign exchange market.The results show that,with the promotion of RMB exchange rate market-oriented reforms and the development of the offshore RMB Market in HongKong,the pricing power in onshore RMB market gradually weakened,while offshore market in Hong Kong is getting stronger;Offshore NDF market continuously plays price discovery function to the spot market and has got the strongest pricing power.At the same time,a volatility spillover effect exists from offshore market in Hong Kong to onshore market,while in both directions from offshore NDF market to onshore and offshore market in Hong Kong.Finally,against offshore market's adversely affect on the pricing power of onshore RMB market,the paper puts forward relevant policy suggestions,like promoting market-oriented reform,establishing onshore futures and NDF derivatives market,creating a early warning system on cross-border capital flows.