Title: The Empirical Research of RMB Exchange Rate Volatility Based on GARCH Model
Abstract: This paper establishes the model of GARCH to test the characteristics of the daily data on RMB exchange rate return.The result shows left biased fat tail and clustering in return of RMB since July 21th of 2005,that is to say not submit to normal distribution.And the volatility memory would be last for long time.The TGARCH results show that to some extent there is leverage effect to exchange rate,so RMB does not have the characteristics of the floating exchange rate.According to the analysis,the leverage effect comes from expectations for further RMB appreciation,so I give the suggestions:reform the exchange-rate system step-by-step and decrease balance of payment surplus to reduce one-way expectations of RMB exchange rate;proper controls of exchange rate fluctuation;set up the exchange derivatives markets to increase financial products for trade companies to avoid exchange risk;government supports the high valued-added companies with other trade policies.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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