An Empirical Analysis of the Band Characteristics under the Influence of RMB Exchange Rate System Reform

Abstract

Based on the long-term trend of the exchange rate between the US dollar and the RMB, the paper establishes the GARCH model in five phases of the RMB exchange rate series, and empirically analyzes the band characteristics of the RMB exchange rate. The empirical results show that the expansion of exchange rate volatility limits increases the sensitivity of the exchange rate series, and the memory is weakened. Although the volatility is significantly increased, the effect of stabilizing the exchange rate is enhanced. The central bank should further deepen the reform of the renminbi exchange rate, combine the formation of the exchange rate mechanism and the adjustment of volatility limits to bring the market efficiency of the renminbi exchange rate into play.