Research On The Spillover Effect Of RMB,USD And Euro Exchange Rates Before And After Shanghai-Hong Kong Stock Connect

The spillover effect refers to the economic activities of an economic individual,which will not only affect the individual itself,but also affect other units or individuals.Extending to the financial field,the exchange rate spillover effect refers to the currency exchange rate of a country or region.Its price,rate of return,or volatility affects not only itself but also the currencies of other countries and regions.The opening of the Shanghai-Hong Kong Stock Connect marked the further opening of China’s capital account and also brought about fluctuations in the capital market.With the continuous improvement of the marketization of the RMB exchange rate,the RMB has become more closely linked to the currency exchange rate returns of other countries and regions.This article is based on the exchange rate data after the exchange reform in 2005.Based on the perspective of capital market opening,by constructing a VAR model,the Granger causality test is used to analyze the RMB,USD,and The correlation between the exchange rate of the euro exchange rate and the BEKK-GARCH model is used to quantify the spillover effects of the exchange rate fluctuations between the RMB,the US dollar,and the euro before and after the Shanghai-Hong Kong Stock Connect.Research shows that before and after the opening of the Shanghai-Hong Kong Stock Connect,the exchange rate yield of the RMB was affected by the exchange rate yields of the euro and the US dollar.There was a significant one-way spillover effect between the yuan and the US dollar,while the yuan and the euro experienced a two-way fluctuation to a one-way fluctuation The change is mainly manifested in the"Shanghai-Hong Kong Stock Connect".The mean value and variance of the euro exchange rate of return will have spillover effects on the fluctuation of the mean value and variance of the yuan exchange rate of return.Based on the research results,this article makes recommendations in terms of advancing the opening of the capital account,maintaining exchange rate stability,and advancing the RMB internationalization process.It is hoped that this will help policy makers face the severe fluctuations in the exchange rate of the US dollar and the euro during the Sino-US trade friction and the new crown epidemic.Adopt more effective fiscal and monetary policies to avoid risks,improve financial stability,and promote the further development of China’s economy,which will help investors fully understand the pros and cons of capital account opening,recognize the situation,seize opportunities,and avoid losses.