Study On Correlation Among Onshore And Offshore RMB Markets

As a paramount international finance centre,HongKong has played a vital role in RMB internationalization process.The rapid development of CNH market in recent years has made it become an important RMB market as onshore market.Onshore market becomes more transparent after the“811”Exchange Rate Reform in2015.Such reform has enhanced the interaction between onshore and offshore markets and it's of great importance to understand such connectivity for both policymakers and market participants.The article compares the interaction between onshore and offshore markets through spot and forward market before and after the“811”Exchange Rate Reform and study its promotional effect on the information convey and so on.The econometrics method is applied in studying the mean spillover effect such as co-integration and VAR and we use GARCH to discover the volatility spillover effect of two markets.We learn from the analyses that no mean and volatility spillover effect exists in spot and forward market before the Exchange Rate Reform.Meanwhile,both spot and short-tenor forward show bilateral mean spillover effect afterwards.As for the volatility spillover effect,after the August 11~thh of 2015,both spot and short-tenor forward markets demonstrate the two-way volatility spillover effect.Based on the analyses and conclusions above,the article advises that the authority should deepen the RMB exchange rate reform and further enhance the construction of the offshore market and its interaction with onshore market.Meanwhile,the authority should also gradually promote the RMB internationalization process on the basis of risk control.