Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240373 
Year of Publication: 
2020
Series/Report no.: 
BOFIT Discussion Papers No. 22/2020
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
We analyse volatility spillovers between the on- and offshore (CNY and CNH) Renminbi exchange rates towards the US dollar (USD). The volatility impulse response (VIRF) methodology introduced by Hafner and Herwatz (2006) is applied to several shocks between January 2012 and December 2019. Furthermore, we propose a novel way of estimating VIRFs based on Bayesian estimation of the MV-GARCH BEKK model. A simple Independence Chain Metropolis-Hastings algorithm allows drawing VIRFs in an efficient manner, allowing to analyse the significance and persistence of volatility shocks and associated volatility spillovers. The VIRF results show that the CNH exchange rate promptly reflects the global market demand and supply, while the CNY exchange rate reacts with a time lag. The VIRF results also show the existence of spillovers between the two markets as the co-volatility increases in response to shocks.
Subjects: 
Renminbi
volatility spillovers
volatility impulse responses
Bayesian estimation
multivariate GARCH models
JEL: 
C32
E58
F31
F51
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-350-8
Document Type: 
Working Paper

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