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Academic Journal of Humanities & Social Sciences, 2019, 2(1); doi: 10.25236/AJHSS.040017.

Research on the Relationship Between RMB Internationalization Index and Exchange Rate Based on VAR Model

Author(s)

Ziying Xun1, Qian Chen2 and Zhen Cao1

Corresponding Author:
Ziying Xun
Affiliation(s)

1 School of Finance, Anhui University of Finance and Economics, Bengbu, 233030, China
2 School of Economics, Anhui University of Finance and Economics, Bengbu, 233030, China

Abstract

With the development of China's economy, the internationalization of RMB has steadily advanced, and RMB has gradually become an internationally recognized currency for pricing, settlement and reserve. This paper uses VAR model, impulse response and variance decomposition to empirically study the quarterly data of China's 2013-2017 RMB Internationalization Index (RII) and USD/RMB exchange rate (ER). The results show that there is a long-term equilibrium relationship between the two indicators. And RII and ER promote each other, at the same time, RII stimulates ER more obviously. Finally, this paper analyzes the empirical results and the status quo of the internationalization of the RMB, and puts forward policy recommendations to promote the steady development of the internationalization of the RMB.

Keywords

RMB Internationalization, Exchange Rate, VAR Model, Recommendations

Cite This Paper

Ziying Xun, Qian Chen and Zhen Cao. Research on the Relationship Between RMB Internationalization Index and Exchange Rate Based on VAR Model. Academic Journal of Humanities & Social Sciences (2019) Vol. 2: 1-10.

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