Research Of Determinants Of RMB Onshore And Offshore Exchange Rate Spread

The development of offshore RMB market has always been an important strategic layout of Renminbi internationalization.Since July 2010,RMB offshore market was launched and has been developing rapidly.However,after the reform of exchange rate on August 2015,offshore and onshore RMB exchange rate two-way fluctuation and the spreads widening have become normal,which seriously damages healthy development of foreign exchange market.Therefore,it is of great practical significance to study on the onshore and offshore RMB exchange rate spread.This paper discusses the fluctuation characteristics of RMB exchange rates spread on the onshore and offshore,and explores main factors affecting volatility of exchange rate spreads.First,review existing literature on exchange rate fluctuations and RMB exchange rate spread.Through comparative analysis of onshore and offshore market,combined with current situation of the of the exchange rate spread fluctuation,theoretically analyze determinants of current exchange rate spread;Secondly,based on daily data from April 2012 to December 2016,ARMA-GARCH model is applied to do empirical research on fluctuation characteristics of exchange rate spread;Again,based on monthly data,VAR model was applied to do empirical research on determinants of current exchange rate spread.The empirical results show that:(1)Volatility features of exchange rate spread:leptokurtic,volatility clustering,heteroscedasticity,long memory,and non-asymmetric with weak leverage effect.(2)Offshore RMB funds and risk appetite of global investors have a significant negative impact on exchange rate spreads;Interest rate spreads are positively related.Finally,proposes policy suggestions:Enhance market liquidity;Effectively guide the market to form a reasonable exchange rate expectations;Protect against negative impact of international financial shock.Reasonably adjust the interest rate level.