Research On The Linkage Effect Of RMB Onshore And Offshore Foreign Exchange Markets

With China's economy entering a new normal,reform and opening up entering a deep-water area,and the continuous escalation of the Sino-US trade war,China urgently needs to internationalize the RMB,integrate its economy into the global financial system and get rid of the hegemony of the US dollar.With the rapid development of people's internationalization,the offshore RMB foreign exchange market is also developing rapidly,and its trading volume has far exceeded the onshore RMB foreign exchange market.This shows that the offshore market has played an important role,and the impact of RMB offshore market on China's economy is becoming more and more important.Unlike the onshore RMB foreign exchange market regulated by the People's Bank of China,the operation of the offshore RMB foreign exchange market is entirely determined by market supply and demand,and cannot be controlled by domestic regulatory authorities,which has formed a dual exchange rate mechanism.Because offshore is not controlled by the central bank,unpredictable exchange rate fluctuations and exposure to exchange rate risks have been the main sources of uncertainty for multinational companies around the world.Therefore,it is of great significance to study the linkage relationship of RMB foreign exchange market in the current situation and to prevent the occurrence and transmission of exchange rate risk.This paper starts with the analysis of the development history,characteristics and the mechanism of the interrelationship between the onshore and offshore foreign exchange markets of RMB,and combines the classical foreign exchange market theory with the special national conditions of China,and analyses the basis of the interrelationship between the prices of the two markets exchange rates.In the empirical analysis,this paper chooses the closing price of RMB's onshore and offshore forward exchange rates from April 16,2012 to December 20,2018.Using comparative and sectional methods,using VAR model,Granger causality test and COPULA-DCC-GARCH model,this paper makes a detailed and deep analysisof the dynamic and long-term and short-term correlation between RMB's onshore and offshore market's forward exchange rates.Input analysis.The results show that: firstly,there are still many obstacles and restrictions in the information transmission of RMB offshore and offshore markets in China.However,with the steady progress of RMB internationalization,the linkage between RMB offshore and offshore markets has become closer,and the circulation channels between markets have become more diversified.Secondly,compared with the RMB offshore foreign exchange market,the correlation coefficient between the offshore foreign exchange market is higher,the transmission of information is faster and more accurate,and the fluctuation of the offshore foreign exchange market is more intense,which is related to the high level of liberalization and unrestricted supervision of the offshore RMB foreign exchange market.Moreover,the dynamic conditional correlation coefficients between CNH market and NDF market and DF market are larger than those between CNY market and NDF market and DF market,which indicates that the relationship between offshore spot and offshore spot and forward is closer,and the pricing right of RMB forward has been transferred to offshore market.Finally,the dynamic correlation coefficients between the onshore and offshore foreign exchange markets show an obvious upward trend,and the volatility spillover effect between the onshore and offshore markets is significant,which shows that the reform of exchange rate formation mechanism and the promotion of RMB internationalization have also shown their due effectiveness.Finally,from the conclusion of the study,reasonable suggestions are put forward for the construction of RMB foreign exchange market,the reform and supervision of RMB exchange rate system.