Modelling Co-movement between Onshore and Offshore RMB Exchange Rate Based on Copula
نویسندگان
چکیده
This paper investigates the dependence of the exchange rate of Onshore RMB and Offshore RMB against U.S. dollar, i.e. CNY and CNH, based on copula models. We select ten different copulas to construct multivariate distribution for RMB exchange rate. The empirical results show that time-invariant Student-t copula is the best model to fit the sample data. The positive of upper and lower dependence indicates that CNY and CNH series tend to move in the same direction. Also, the results indicate that the dependence between the two exchange rates is time-invariant and symmetric, which means that traditional models such as Pearson’s correlation are inappropriate to measure the correlations between these markets. Keywords-copula; RMB exchange rate; dependence modelling
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