TITLE:
Reinvestigation of the Interaction between the RMB Onshore and Offshore Markets: An Empirical Analysis Based on Hourly Data
AUTHORS:
Zijiao Wang, Qunyong Wang
KEYWORDS:
RMB Onshore and Offshore Markets, Interaction, Hourly Data, Granger Causality, Multivariate GARCH
JOURNAL NAME:
Modern Economy,
Vol.8 No.12,
December
12,
2017
ABSTRACT: This paper studies the Renminbi (RMB) spot exchange rates
against USD to test whether the interaction between the onshore and offshore
markets is stable. The Granger
Causality test and the BEKK-GARCH model are adopted
for five sub-periods, and the results show that the spillover effect in mean
and volatility differs in different periods. Our results show that hourly data analysis is a
better method detecting the subtle changes of the spot exchange rates between
the CNY and the CNH markets. There are bidirectional Granger causalities
between the CNY and the CNH spot exchange rates in both the entire period and
the five sub-periods. When the market volatility is high, the impacts become
unidirectional by the onshore intervention. The exchange rate of CNH renders a
stronger leading role within the opening year of the offshore market, and then
the CNY ones take the guiding role for a long time. The bidirectional
interactions between CNY and CNH spot exchange rate reveal the information
superiority of Chinese government by edging the CNY market over the offshore
one, at the same time, readjusting the exchange rate of the CNY based on the
CNH changes in exchange rates in line with market expectations.