Research On The Linkage Between Offshore And Onshore Exchange Rates From The Perspective Of RMB Internationalization

In recent years,with the continuous deepening of the opening up of China’s financial industry to the outside world,the internationalization level of the RMB has also been continuously improving,and the transaction amount in the RMB foreign exchange market has increased year by year.The process of internationalization of the local currency will inevitably be accompanied by the linkage of the local and foreign currency markets,with more frequent changes in exchange rates,interest rates,and capital prices.The construction and development of the RMB offshore market represented by Hong Kong has played an important role in promoting China’s RMB market-oriented reform and RMB internationalization.Therefore,this article aims to reexamine the linkage relationship between the offshore exchange rate market from the perspective of RMB internationalization,analyze the main characteristics of the linkage relationship between the offshore exchange rate market,and explore the role and challenges of RMB internationalization in the development of the offshore and onshore markets.Based on existing research on the linkage between offshore and onshore exchange rates of RMB and the exchange rate formation mechanism,this article clarifies the linkage between offshore and onshore markets in the process of RMB internationalization from the perspective of international macro and regional practice.Firstly,this article briefly introduces the background,purpose,and significance of this study,through literature review and multi-angle review,this paper analyzes the development of RMB internationalization,the development of offshore markets,the linkage between offshore and onshore markets,and the exchange rate fluctuations in the process of RMB internationalization.Then,it analyzes the market formation mechanism of the RMB exchange rate at the current stage,deduces the variables that affect the linkage relationship between the RMB and onshore exchange rate,and makes research assumptions based on the theoretical model of influencing factors of exchange rate changes proposed by Verdelhan(2018);Secondly,based on the daily data from June 2011 to December 2020,establish a DCC-GARCH model to estimate the dynamic correlation of exchange rates in the onshore market;using VAR model to analyze the driving effect of RMB internationalization on the correlation of exchange rates in the onshore market.Then,from the perspective of domestic regional practice,using the Bay Area construction to promote the process of RMB internationalization as the research perspective,using the Panel Threshold Model(PSTR)empirical research found that under different degrees of RMB internationalization,different economic variables have an impact on the exchange rate linkage in the offshore market.In the context of closer international ties and dual international and domestic cycles,it is particularly important to boost the domestic economy and maintain exchange rate stability to enhance the international position of the RMB.Finally,based on the research findings,suggestions are proposed to steadily promote the process of RMB internationalization,accelerate the transformation of the offshore market,strengthen cooperation in the offshore market,and prudently open financial accounts.