Research On The Volatility Spillover Effect Between The Onshore And Offshore Market Prices Of RMB

In recent years,China has implemented a series of exchange rate reform measures,deepened the reform of the exchange rate continuously,experienced three major exchange rate reform policies,and The exchange rate elasticity has increased significantly.While perfecting the pricing mechanism of the onshore market's exchange rate,the construction of offshore market should be fully implemented.Chinese renminbi onshore market form earlier,development time is longer and the market size is larger,and Hong Kong's renminbi offshore market started late,the market scale,the degree of legalization and internationalization,compared with the onshore yuan market,have a certain gap,but the offshore market has a higher degree of autonomy and degrees of freedom,The renminbi has become more and more important in the international money market,in such a situation,China need to keep an open economy,making the yuan as the international monetary effect more apparently.Hong Kong,the world's third-largest international financial centre,has become the world's largest offshore renminbi market.As a result,the two-way communication between onshore and offshore market has become the requirements of this kind of situation,after the completion of the offshore market in Hong Kong since 2010,the RMB cross-border flows more easily,internationalization development degree is higher,with the increase of RMB cross-border trade scale and the development of the regional currency swap business,Hong Kong's renminbi offshore and onshore yuan markets are more closely linked,and presents the increasing trend.Renminbi offshore market plays a significant role in the process of RMB internationalization,the exchange rate reform policies lead to offshore and onshore an obvious fluctuations,also makes the relationship between the yuan market becomes more complicated.The linkage between Hong Kong's offshore foreign exchange market and onshore foreign exchange markets will be tighter.Therefore,it is very important to study the spillover effect between RMB market.It is in this context that this paper focuses on the correlation and volatility between RMB onshore and offshore market.This paper combed the interactive relationship between onshore and offshore markets,the theory and principle of the sample data are descriptive statistics,analysis of the offshore and onshore renminbi exchange rate yields the mean and variance of characteristics.Due to the relationship between the two markets is mainly affected by interest rate parity theory,this paper from two aspects of uncovered and the uncovered interest rate parity theory introduction,through the analysis of the theory and mechanism,and puts forward three basic assumption:the offshore market in Hong Kong is the world's all in the offshore market assets and the largest offshore market,its fluctuation on onshore market will have a significant spillover effect.With the development of offshore market,the onshore market shows obvious fluctuation spillover effects on the offshore market with the prosperity and development of the onshore market.Based on the comparison of the size of the market and the amount of capital,it is believed that the onshore is more dominant to the offshore.In this paper,first using the quantile regression to onshore and offshore relationship between quantity and price of two markets for empirical research,the results found that the yields and the CNY market trading volume is negative correlation,but the CNH market rate and yield of correlation is not very clear.Then through VAR model,Granger causality test,impulse response and variance decomposition to study the correlation of two market exchange rates,found that there exists a long-term equilibrium relationship between onshore and offshore market,will influence each other between the two markets.But by comparison,the onshore market is dominant and has a bigger impact,and the offshore market is less influential.Article empirical finally emphatically explores the renminbi onshore and offshore market price volatility spillover effect between,through the BEKK-GARCH(1,1)model is found between onshore and offshore market will produce bidirectional volatility spillover effect,and onshore showed onshore showed stronger wave source status.By the end of the article,summarizing full text concluded that the volatility spillover effect can be seen that due to the change in policy,increasingly close relationship between two markets,affected each other between each other.But the spillover effects of the onshore market on offshore markets remain dominant.And put forward policy Suggestions in view of the regulation:offshore RMB supply should be reasonable control of the market,and the people's bank of China should step up the RMB exchange rate flexibility,active exchange rate control strategy.