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Academic Journal of Business & Management, 2022, 4(3); doi: 10.25236/AJBM.2022.040316.

Research on the correlation between offshore and onshore RMB spot exchange rates based on VAR-ECM model


Siqiang Gong1, Rongrong Xiong2, Hua Fang3

Corresponding Author:
Siqiang Gong

1&3Business School, University of Shanghai for Science and Technology, Shanghai, 200093, China

2School of Public Administration, Southwest Jiaotong University, Chengdu, 610031, China


This paper selects the daily data of offshore and onshore RMB spot exchange rates from 2012 to 2022 to establish a first-order VAR model to study the correlation between offshore and onshore RMB spot exchange rates. On this basis, an ECM model is established to further analyze the error correction term of the previous period and the impact of the fluctuation of the other party in the same period.Through empirical research, it is found that there is a cointegration relationship between the spot exchange rate of offshore RMB and onshore RMB and they are Granger causality. On the whole,there is a positive relationship between them. Specifically, the offshore and onshore RMB spot exchange rates have a certain time lag in the transmission of market information, which will lead to the emergence of arbitrage opportunities. Through the analysis of variance decomposition and error correction model results, it is found that the impact of the onshore RMB market on the offshore RMB spot exchange rate fluctuation is close to 50%, while the offshore impact on the onshore RMB exchange rate fluctuation is less than 30%, indicating that the onshore RMB is currently in the dominant positionthe of exchange rate influence mechanism.Based on this conclusion, it is suggested that government pay attention to the impact of onshore RMB market, continuously improve the order of the onshore RMB market, promote the healthy development of offshore and onshore RMB markets, thus promoting the internationalization of the RMB.


RMB exchange rate; VAR-ECM model; offshore market; onshore market

Cite This Paper

Siqiang Gong, Rongrong Xiong, Hua Fang. Research on the correlation between offshore and onshore RMB spot exchange rates based on VAR-ECM model. Academic Journal of Business & Management (2022) Vol. 4, Issue 3: 87-94. https://doi.org/10.25236/AJBM.2022.040316.


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