Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates
Abstract
We employ the thermal optimal path method to explore both the long-term and short-term interaction patterns between the onshore CNY and offshore CNH exchange rates (2012-2015). For the daily data, the CNY and CNH exchange rates show a weak alternate lead-lag structure in most of the time periods. When CNY and CNH display a large disparity, the lead-lag relationship is uncertain and depends on the prevailing market factors. The minute-scale interaction pattern between the CNY and CNH exchange rates change over time according to different market situations. We find that US dollar appreciation is associated with a lead-lag relationship running from offshore to onshore, while a (contrarian) Renminbi appreciation is associated with a lead-lag relationship running from onshore to offshore. These results are robust with respect to different sub-sample analyses and variations of the key smoothing parameter of the TOP method.
Keywords
Cite
@article{arxiv.1803.09432,
title = {Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates},
author = {Hai-Chuan Xu and Wei-Xing Zhou and Didier Sornette},
journal= {arXiv preprint arXiv:1803.09432},
year = {2018}
}