Research On Influencing Factors Of Changes And Fluctuations Of The RMB Onshore And Offshore Exchange Rate Spread

In the context of economic globalization,the level of RMB internationalization continues to raise,and the connection between the RMB onshore market and offshore market becomes increasingly close.However,these two markets are different from each other in terms of development histories,pricing mechanisms,capital flows,etc.As a result,the RMB onshore and offshore exchange rate spread has been changing and fluctuating for a long time.On 11^th August,2015,the People's Bank of China adjusted the quota mechanism of the RMB daily reference rate,which indicates that the pricing system of the RMB exchange rate has become further liberalized.Since the“8.11”exchange rate reform,not only the bi-directional volatility of the RMB exchange rate has been enhanced,but also financial opening up strategies have been promoted the liberalization of cross-border capital flows.This article uses the GARCH model and the MS-VAR model to explore the influencing factors of the RMB onshore and offshore exchange rate spread,as well as specific effects of these factors in different economic status after the“8.11”exchange rate reform.On the basis of the theoretical analysis and literature review,the RMB onshore and offshore exchange rate spread is susceptible to market conditions,international environment and foreign exchange system.Therefore,this article introduces relevant influencing factors as exogenous explanatory variables and dummy variables into the GARCH model.The results demonstrate that the volatility of international market and the interest rate spread between onshore and offshore markets display negative correlations with the RMB onshore and offshore exchange rate spread.While the expectation of the RMB,the risk premium of investors and the interest rate spread between domestic and international markets display positive correlations with the RMB onshore and offshore exchange rate spread.Additionally,the fluctuation of the RMB onshore and offshore exchange rate spread is greatly affected by reforms of exchange rate policies.Furthermore,a MS-VAR model also be used to analyze characteristics of the RMB onshore and offshore exchange rate spread.The results show that the RMB onshore and offshore exchange rate spread are mostly remain in the state of low economic fluctuation and the average duration is long.However,the duration of high economic fluctuation state is short and usually occurred after“8.11”exchange rate reform.Last but not least,the impulse responses show that the more active the RMB onshore and offshore exchange rate spread becomes,the more significant the effects of influencing factors are.