Research Of Volatility Spillover Effect Between RMB Exchange Rate Market And Gold Market Based On GC-Multiple Stochastic Volatility Model

Gold market and foreign exchange market are the two important parts of the financial system, it is crucial to operate them well for the stability and safety of the financial system in our country. In such an era that information technology is highly developed, Financial risks resulted from the abnormal fluctuations in financial market transmit between different countries and subsidiary markets frequently, which makes the financial system in our country is more likely to under threat with the risks. So clarifying the volatility transmission mechanism in the financial sub markets may be helpful to the policy-making and make the investors more informed of the markets themselves and the interaction mechanism to make appropriate choices. Firstly, this paper describes the background and significance of the research, on this basis, I did some theoretic analysis about gold market and foreign exchange market. Furthermore, I also analyzed the model and parameter estimation method in this paper in detail. Then, in the empirical part, this paper studies the RMB exchange rate against the dollar, the NYSE COMEX gold price index, the London Bullion Market gold price index during the past 10 years, uses the MCMC method to undertake the parameter estimation of MSV(multivariate stochastic volatility) Model based on Granger Causal relation, and tests the volatility spillover between RMB exchange rate and international gold return series.Through the above test results, the paper reaches the following three conclusions: First,there is a unidirectional volatility spillover effect between the RMB exchange rate against the dollar and the New York international gold price of gains sequence;Second, there is a bidirectional volatility spillover effect between the fluctuation of RMB exchange rate against the dollar and the New York international gold series, spillover effect of foreign exchange market to the futures market stronger than futures market to the foreign exchange market; Third, there is a unidirectional volatility spillover effect of RMB foreign exchange market to the domestic gold market and risk conduction of domestic gold market to RMB exchange rate fluctuation is not obvious. This paper puts forward some suggestions on the development of gold market and exchange market as well as some reasonable policies in order to provide useful reference for the orderly development of the gold market and the foreign exchange market.