Research On The Linkage Effect Between Offshore RMB Market And Onshore Market Exchange Rate

At present,China's capital market has not yet been fully opened,and the establishment of offshore RMB market is of great significance for RMB internationalization,besides,it is also an important strategic step to further promote capital account opening.At the same time,the acceleration of RMB internationalization process also promotes the rapid development of offshore RMB market,leading a closer relationship between offshore RMB and onshore market.Consequently,it is important to study the linkage effect between offshore RMB market and its onshore market.Built on a theoretical and empirical study,this thesis will mainly explore the linkage effect between offshore RMB market and onshore exchange rate market.For further study,this thesis is also research the influence factors of the linkage effect Linkage effect between the offshore RMB and the onshore exchange rate market.the specific contents are as follows:Firstly,this thesis will provide an illustration of RMB onshore market and the major offshore RMB exchange rate market.Then this thesis will theoretically analyze the exchange-rate linkage effect between offshore RMB and onshore exchange rate market.In addition,experience and lessons on RMB internationalization will be put forward through an analysis on the currency internationalization of the major developed countries.Secondly,this thesis will empirically study the exchange-rate linkage effect between onshore and offshore RMB exchange rate market.As for the linkage effect,this thesis will make an analysis from the perspective of mean spillover and time-varying correlation,using the VAR model and the DCC-GARCH model.Thirdly,in order to know more about which variables affect the exchange-rate linkage effect between RMB offshore and onshore exchange rate market to avoid currency risk,this thesis using the method of Shapley value decomposition to research the influence factors of the linkage effect Linkage effect between the offshore RMB and the onshore exchange rate market.Since every factors could not solely influence one market,this thesis will take the difference between the offshore RMB and onshore market exchange rate as explained variable to analyze.Lastly,corresponding policy suggestions based on the empirical result will be put forward.The conclusions are as follows: Firstly,the exchange rate reformation makes the onshore spot exchange rate market and the offshore RMB spot exchange rate market not have the mean spillover effects,and Non-deliverable Forwards market has spillovereffects to the onshore spot exchange rate market and the offshore RMB spot exchange rate market regardless of the exchange rate reformation.Secondly,the time-varying between offshore RMB market and onshore market is much greater than before the exchange rate reformation.But reduce the time varying correlations between the offshore RMB market and Non-deliverable Forwards market.Thirdly,the expectations of RMB,market volatility expectations,liquidity in international markets and the difference in money market yields have positive effect to the difference between the offshore RMB and onshore market exchange rate.Onshore market liquidity has negative effect to the difference between the offshore RMB and onshore market exchange rate.Market expectations have the highest contribution to the difference between the offshore RMB and onshore market exchange rate.Market rate of returns have the lowest contribution to the difference between the offshore RMB and onshore market exchange rate.