The Analysis Of RMB Exchange Rate Volatility Based On Time Series Model

Since China joined the world trade organization (wto), the market furthergrowing, and the development of globalization makes the world pay attention to theRMB exchange rate. The RMB plays an important role in international trade andindividual investors trade. On June19,2010The people’s bank of China announced tofurther promote the reform of RMB exchange rate formation mechanism, increase theelasticity of the RMB exchange rate. Since the revaluation of the RMB exchange ratefluctuations are more frequent and amplitude are rising. The RMB exchange ratevolatility caused extensive concern of the countries and investors. Therefore, in thefurther background, to push forward the reform of RMB exchange rate formationmechanism analysis and forecast the fluctuations of the exchange rate characteristicshas certain practical significance.This article through to the domestic and foreign scholars on the currency andrelated research achievements in the field of study, using the method of combiningqualitative analysis and empirical analysis, analyses the RMB exchange rate volatility.First established the exchange rate and error correction model of foreign exchangereserves, and adopts the method of Granger causality test, determine its correlation,and then construct the prediction model of exchange rate fluctuations. Secondly, usingyield sequence of the dollar against the RMB exchange rate and the dollar against yenexchange rate, using GARCH and EGARCH model can respectively be fitting anddescribe the characteristics of exchange rate fluctuations. The conclusion of theempirical analysis shows that there was a negative correlation between foreignexchange reserves and exchange rates. when put the logarithmic sequence of foreignexchange reserves into the logarithmic sequence of RMB’s mean equation, can bewell fit the trend of the RMB exchange rate. The RMB exchange rate volatility hasheteroscedasticity, agglomeration, fluctuation of sustainability, but leverage effect inthe RMB exchange rate is not significant. Compared with the correspondingsequences of USD/JPY in international foreign exchange market, the leverage effect isobvious.Based on the result of empirical analysis and the actual conditions of China, the paper put forward to increase the flexibility of the RMB exchange rate, lead investorsto exchange rate of rational expectations.Central bank intervention appropriatelymake some measures in currency markets. Then perfecting our country’s financialsystem. The paper come up with promoting the progress of RMB internationalizationoptimize the structure of foreign exchange reserves, reducing the pressure on theappreciation of the RMB in foreign exchange reserves, gradually forming themarketization of interest rate in our country.