The Influence Of RMB Exchange Rate Difference On The Linkage Between On-offshore Market

Since the reform and opening up 40 years ago,China's financial sector has been opening wider and wider to the outside world,especially in the past decade.With the acceleration of interest rate liberalization,the level of China's exchange rate liberalization is also improving,and the scale of RMB foreign exchange market is expanding day by day.As an inevitable product of marketization,RMB exchange rate fluctuations and offshore RMB exchange rate fluctuations are increasingly prominent in significance and correlation,and exchange rate fluctuations will affect the linkage relationship between cross-strait markets through a variety of channels,which brings some challenges to the stability and security of China's foreign exchange market.However,previous studies have focused on "the linkage between the onshore and offshore RMB market" or "the volatility of the offshore RMB exchange rate difference" respectively,and few studies have organically combined the exchange rate difference with the linkage between the two markets.At the same time,in the research on the offshore market and the onshore market,scholars pay more attention to the linear linkage between the two markets,and only in recent years have some scholars turned to discuss the nonlinear characteristics of the linkage.On the basis of reviewing the existing domestic and foreign literatures,this paper studies the influencing factors and regional characteristics of the linkage relationship between the onshore and offshore RMB exchange rates.Firstly,it explains the basis and influence channel of the linkage relationship between the two markets.Secondly,this paper analyzes the linkage between the onshore market and the offshore market in China through the measurement method,takes the exchange rate into account,adopts the linear and threshold error correction model,and finds that the linkage between the onshore market and the offshore market has significant regional characteristics.The empirical process is as follows: the linkage relationship between the onshore and offshore RMB exchange rates in the foreign exchange market between June 2011 and April 2019 is divided into two regional systems,which fully verifies the difference in the linkage relationship between the two markets under different regional systems,and provides relevant policy Suggestions to maintain the stability of China's foreign exchange market.The conclusions of this paper are as follows:(1)the main factor determining the fluctuation of the offshore and onshore RMB exchange rates is the difference in the return rate between the mainland and Hong Kong capital markets,which shows a significant negative impact;Other exogenous variables have significant influence on the exchange rate of the offshore market,but not the onshore market;(2)the onshore market exchange rate has a significant and steady guiding effect on the offshore market exchange rate;(3)when the difference between onshore and offshore exchange rate is less than the threshold value,the market is in the "equilibrium zone system".The exchange rate of offshore market will adjust spontaneously due to the guiding role of the onshore market and its mean reversion.At this time,the long-term equilibrium relationship will be rebuilt at a faster speed;(4)when the difference between onshore and offshore exchange rate is greater than the threshold value,the market is in the "deviation zone system".At this time,the onshore exchange rate shows the feature of mean regression,the offshore market shows the feature of "chasing after the rise and destroying the fall",and the RMB exchange rate is seriously unbalanced.At this time,it takes longer to rebuild the long-term equilibrium relationship through the market mechanism.Based on the conclusions drawn in this paper,the following policy recommendations are put forward:(1)take exchange rate difference as a macro observation quantity,and continuously monitor its dynamics;(2)When the onshore and offshore foreign exchange markets deviate from each other,the central bank can make use of the policy to "correct the deviation" in a timely manner and give better play to the role of the market self-regulation mechanism;(3)Enrich the types of foreign exchange traders in the onshore market and further improve the price discovery function of the onshore market;(4)Establish a long-term and short-term mechanism to deal with global risks,promote the integration of RMB in the offshore market,and accelerate the process of RMB internationalization.