The Research Of Mutual Influence On The Offshore Market RMB Exchange Rate And The Onshore RMB Exchange Rate

With the rapid development of China, the internationalization of RMB is also steadily implemented. Especially after the Financial Crisis, China gradually accelerated the pace of the RMB internationalization, in order to cope with the growth pressures of export that was caused by depreciating their currencies for many overseas （regions） and also to speed up the adjustment of China’s Economic Structure. At the same time, the RMB Offshore Market expands rapidly. In a new period, it is worthy to discuss the mutual influences between the domestic and the overseas RMB markets, which can give us some guidelines to stabilize the RMB Exchange Rates and the whole economic environments.The dissertation selects the related RMB Exchange Rates since 2011 when the Hong Kong market launched RMB Spot Exchange Rate as the object of research, mainly including the Hong Kong market-Spot, Futures and NDF Exchange Rates and the domestic market-Spot, Forward Exchange Rates. The dissertation discusses the mutual influence on the Offshore Market RMB Exchange Rate and the domestic RMB Exchange Rate from two different aspects:the guiding effect and volatility spillovers. In the study of guiding effect, the dissertation mainly uses the VAR model, Granger causality test, impulse response method. The study has shown that the Onshore Spot Exchange Rate could impose the single direction guiding effect on the Offshore RMB Exchange Rate since 2011. In other words, the domestic spot market is the information center on the change of RMB exchange rate. It has a strong pricing power. But there are the bidirectional guiding effect between the domestic Forward Exchange and the Offshore RMB Exchange Rate. In the study of volatility spillover, the dissertation mainly researches whether the volatility spillover exists between Offshore and Onshore RMB Exchange Rates, as well as the direction of the volatility spillover through the multivariate volatility model MVGARCH-BEKK. The study has shown that the offshore market is the information center in terms of volatility since 2011. Especially the Hong Kong RMB NDF Market, there is volatility spillover on the both domestic Spot and Forward Exchange Rates. The NDF has only a single direction spillover on the Spot but bidirectional spillover with the Forward. Therefore, the NDF Market is an important cause of the RMB fluctuation. In addition, the Hong Kong RMB Spot and Futures Exchange Rates can’t impose a significant guide effect and volatility spillover on the domestic Spot, because of the short launch time and low trading volume. The domestic Forward Rate has a more significant mutual influence with the Offshore RMB Rates than the domestic Spot. So there is more sufficient information flow between the Offshore Market and the domestic Forward Market that is more open than the Spot. Overall the NDF Exchange Rate can bring significantly volatility spillover on the domestic exchange rate, but the guiding effect is not significant. The domestic Spot Exchange Rate can guide significantly the offshore market, but the spillover was not significant.