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arXiv · 1803.09432

Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates

Hai-Chuan Xu·Wei-Xing Zhou·Didier Sornette
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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.

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Hai-Chuan Xu, Wei-Xing Zhou, Didier Sornette. 2018-03-26. Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates. https://doi.org/10.1016/j.intfin.2017.05.001

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