Research on the Volatility of RMB Exchange Rate based on GARCH Model

Authors

  • Wenhan Zhu, Yue Yan

Abstract

As one of the most basic macroeconomic factors of open economy, exchange rate has an irreplaceable influence on international economic and finance. The fluctuation of exchange rate is characterized by fluctuation rate, thick tail and asymmetry. In this paper, the average middle price of USD/RMB per day from 2007 to 2017 is collected and processed as sample data, and the fluctuation rate sequence is established by taking logarithmic difference. Based on the GARCH model, the characteristics and reasons of its fluctuation are explored and the feasibility of the model is verified by prediction. In descriptive statistics for 2431 data, this paper analyzes the reasons of the RMB exchange rate in three phase fluctuation and its influence, including 08 the subprime crisis, 15 years, the central bank adjusted the quotation of RMB exchange rate system adjustment, 17 years of foreign exchange reserves. It is found that the fluctuation is obvious with the deepening of the exchange rate marketization degree. The analysis indexes mainly include mean, standard deviation, skewness, kurtosis and j-b statistics. After processing the data, the applicability of the GARCH model was tested, including the stationarity test and the ARCH effect test, and the logarithmic difference sequence of the exchange rate fluctuations was found to be applicable to the GARCH(1,1) model. After the establishment of GARCH(1,1), this paper selects 677 sample data from January 21, 2015 and October 31, 2017 to conduct model test, and compares the RMB exchange rate in November 2017 with the real value. The error is found within acceptable range and the model is true and reliable.

Using data from 2007 to 2017 to establish a GARCH (1, 1) model, after the analysis of exchange rate volatility, in this paper, according to the regularity and characteristics of RMB exchange rate fluctuations on the present stage of monetary policy put forward to perfect the floating exchange rate system, value and standard digital currency and establish and improve the derivatives market views and Suggestions..

Published

2021-12-30

Issue

Section

Articles