Abstract

ABSTRACT The RMB offshore financial market (CNHFM) has developed rapidly, presenting challenges to economic and financial stability and regulation. This study selects the risk indicators of CNHFM and onshore financial market (CNYFM) from April 2014 to October 2022, using the TVP-SV-VAR model to study the risk spillover effects of CNHFMs on domestic financial markets. We conclude that offshore interest rate (CNH HIBOR) risk and exchange rate risk (USDCNH) have increased onshore interest rate (CNY SHIBOR) risk and the onshore exchange rate (USDCNY). The impact of the USDCNH risk on onshore capital markets strengthened after the ‘8.11 exchange rate mechanism (ERM) reform’. The spillover effects of CNHFM risk on the CNYFM are more significant in the short term. Broadly, the spillover effects of CNHFM risk on CNYFMs are concentrated in the first five periods.

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