A Study on the Interaction between Offshore and Onshore Exchange Rates in the Process of RMB Internationalization

Abstract

In recent years, the offshore RMB market has played a pivotal role in the process of RMB internationalization, and the interaction
with the onshore exchange rate has been strengthened. How the policy makers view and make use of this relationship is of great significance
to promote the synchronous development of the onshore and offshore markets and the internationalization of RMB. This paper uses vector
autoregression to compare the exchange rate interactions between the onshore and offshore markets before and after the “8-11” exchange re_x005fform, and analyzes the spillover effects between the two markets. The analysis concludes that before the “8-11” exchange reform, only CNH
has a unidirectional influence on NDF and CNY, and the spillover effect of CNY on CNH and NDF is smaller; after the exchange reform,
the onshore market and offshore market show a two-way spillover effect, and with the advancement of the internationalization of the RMB,
the influence of the NDF market is getting smaller and smaller. is getting smaller and smaller. On this basis, this paper proposes that China
should gradually realize the internationalization of RMB on the basis of deepening the reform of the RMB exchange rate system and improving the interaction between the offshore market and the onshore market.