Dependence Analysis Of RMB To 25 Kinds Of Currencies Exchange Rates Fluctuations

With the deepening of China's economic ties with the world economy,the RMB exchange rate is becoming more flexible,the fluctuations range is also increasing gradually.While the RMB exchange rate begins to face economic shocks from the global market,it is no longer limited to impact the exchange rate of RMB to the single currency,but the entire exchange rate system.On Oct.1,2016,RMB are included in the SDR currency basket as a fifth reserve currency,along with the U.S.dollar,the euro,the Japanese yen and the British pound.The fluctuations of RMB exchange rate will increasingly become the focus of the market in the future.Deepening the reform of exchange rate also have made the system become more diverse and complex.It is essential to understand the subtle correlation between the exchange rates for having an insight into the nature of the entire system.The structural study for RMB exchange rate fluctuations will be helpful to enhance the understanding of this complex system,thereby to bring more effective management.On the basis of combing relevant literature and theories,Vine Copula model is established to analyze the dependence of exchange rate fluctuations of RMB to 25 kinds of currencies.The dependence structure of RMB exchange rate is described.The research period is divided into three periods by the events with a significant impact on the exchange rate,that is,before the reform in 2005,after the 2005 exchange rate reform,the reform restart in 2010 periods,in order to compare the effect of the exchange rate reform in 2005 and the reform restart in 2010 on RMB exchange rate fluctuations system.The results show that in terms of dependence,these reforms have profound influence on the exchange rate structure,and the dependencies between a part of exchange rates are becoming more and more apparent.Currently the exchange rates of RMB to these different currencies can be divided into four categories according to dependence,and they are respectively represented by the exchange rates of RMB to US dollar,euro,Singapore dollar,Australian dollar.Thus the exchange rate of RMB to the US dollar is the most effective management tool.Compared to the euro and the yen,its implementation of interventions is less inclined to produce unexpected effects on other exchange rates.Therefore,given the complex structure of this system,the implementation of exchange rate interventions should focus on the coordination and coherence of policy effect in the system.