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

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  • Xu, Hai-Chuan
  • Zhou, Wei-Xing
  • Sornette, Didier

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.

Suggested Citation

  • Xu, Hai-Chuan & Zhou, Wei-Xing & Sornette, Didier, 2017. "Time-dependent lead-lag relationship between the onshore and offshore Renminbi exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 49(C), pages 173-183.
    • Handle: RePEc:eee:intfin:v:49:y:2017:i:c:p:173-183
    DOI: 10.1016/j.intfin.2017.05.001
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    20. Yan-Hong Yang & Ying-Hui Shao, 2019. "Time-dependent lead-lag relationships between the VIX and VIX futures markets," Papers 1910.13729, arXiv.org.
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    22. Domenico Giovanni & Arturo Leccadito & Marco Pirra, 2021. "On the determinants of data breaches: A cointegration analysis," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(1), pages 141-160, June.
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    More about this item

    Keywords

    Renminbi exchange rates; Onshore and offshore markets; Lead-lag structure; Thermal optimal path;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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