The Linkage Effect Between The Offshore Market And The Onshore Market Of RMB

With the acceleration of the internationalization of RMB,the International Monetary Fund announced that RMB formally joined the Special Drawing Rights(SDR).RMB has become one of the major currencies in the international financial market.More than 60 countries and regions have incorporated RMB into their foreign exchange reserves.Under the background of current economic globalization,the offshore market of RMB has developed rapidly.As of May 2018,the total deposit size of the offshore market of RMB has reached 1.03 trillion yuan.However,the increasing frequency of foreign capital shocks and other issues followed.Therefore,studying the linkage effect between the offshore market and the onshore market of RMB can effectively analyze the interaction between the offshore market and the offshore market of RMB,help the central bank to control the fluctuation of RMB reasonably,strengthen the supervision and management of the offshore market and the onshore market of RMB,promote the coordinated development of different markets,and jointly form an important thrust of RMB internationalization.This paper discusses the linkage effect of RMB exchange rates in the onshore and offshore markets from three aspects:theory,reality and empirical analysis.Firstly,this paper reviews the relevant literature on information transmission theory between markets,exchange rate determination theory and linkage effect.Secondly,this paper elaborates on the current situation of RMB onshore market and offshore market,in order to analyze the linkage mechanism between RMB onshore market and offshore market.Thirdly,through establishing price spillover model and volatility spillover model,this paper empirically studies the linkage effect between onshore and offshore markets of RMB before and after the 8.11 exchange rate reform.The research result shows that in terms of price spillover,the onshore and offshore markets of RMB are quite different before and after the 8.11 exchange rate reform,and the price spillover effect is obvious after the 8.11 exchange rate reform.In terms of volatility spillover,there is little difference between the onshore and offshore markets of RMB before and after the 8.11 exchange rate reform.Finally,according to the empirical results,this paper puts forward some policy suggestions,such as increasing exchange rate elasticity,adjusting exchange rate regime in time and improving the RMB reflux mechanism in offshore market,aiming at the development of RMB offshore market and RMB offshore market respectively.