Research On Dynamic Process Of RMB Pricing Power

In July 2005,China embarked on the reform of exchange rate marketization mechanism.Since then,the RMB exchange rate fluctuation(floating in both currency appreciation and depreciation)expanded with remarkable effect.However,in the past two years,it has grown more complicated in establishing the connection between both domestic and international currency exchange market,as correlation impact from both continuous flowing of international speculative capital,and the frequent intervention from changes of polic y in central bank,It becomes an attractive topic to many scholars.Since the exchange rate reform in 2005,the trend of change in the RMB exchange rate market draws people's attention,and many concerned about the leading market.The unforeseeable change of RMB exchange rate also triggered the bull and bear game(long-short game)of Hong Kong offshore market,thus it highlights the importance of RMB pricing power.Based on the "Contagion Effect" and the mechanism of the price discovery function in the exchange market,this article refers to the daily data of the onshore market(CNY),as well as the offshore non-deliverable forward market(NDF).Referring to the ce rtain point-in-time,which the central bank expand the exchange rate fluctuation interval.In order to determine the price discovery function,granger causality test is applied to test the linkage in between market price.The GARCH-BEKK model is used to test the effect of exchange rate linkage under different exchange rate fluctuation intervals to carry out intuitive analysis of the dynamic evolution of RMB pricing power.Finally,it combines the exchange rate battle in Hong Kong offshore market to explore the ownership of RMB exchange rate pricing power.In order to ensure an accurate and comprehensive analysis,this article covers varies data,which include seven different terms of forward products and the spot exchange rates to form data samples.The results shows that:Refer to Mean Spillover Effect,when the fluctuation interval is between 0.3%and 0.5%,the price guiding capacity of medium-term offshore exchange rate is relatively stronger;As the fluctuation interval is expanded to 1%,the lead capacity of short-term offshore exchange rate is enhanced significantly;As the fluctuation interval expand to 2%,the offshore long-term exchange rate impact on the full-scale spot exchange rate.Refer to the Volatility Spillover Effect,the spot exchange rate has a stronger price guiding capacity in the range of 0.3%;the offshore long-term exchange rate is guided by the medium and long term spot exchange rate when the fluctuation range is 0.5%,the short-term offshore has a guiding effect on the spot exchange rate;In addition to the long-term forward exchange rate,the price leadership ability is stronger than the on-shore spot rate when the fluctuation range is expanded to 1%.Since the range expanded to 2%,the price leadership ability increased significantly.The offshore long-term exchange rate guides the onshore spot exchange rate gradually,until the offshore forward exchange rates have a full impact on the spot exchange rate and enhance its full effect to the onshore spot exchange rate.RMB pricing is a dynamic process of evolution process,the expansion of fluctuation interval will strengthen the dominance of the offshore exchange rate.In the process of competition on RMB pricing power,the central bank consumes foreign exchange reserves and tighten the liquidity of the offshore RMB market are short-term expedient.Reasonable guidance of the RMB exchange rate expected is required.We must abide by law of supply-demand supplemented by appropriate control measures.And the establishment of efficient,flexible and flexible RMB exchange rate pricing mechanism is the fundamental policy in the long-run.