Empirical analysis of the impact of RMB offshore market in Hongkong on monetary policy in China

摘要

Combined with the Markov regime switching vector autoregressive model (MS-VAR), this paper empirically analyses the nonlinear relationship between the RMB Offshore Market in Hongkong and monetary policy under different regional regimes. The research finds MSIH(3)-VAR(2) model can better describe the relationship between variables. The data are divided into three regimes which are Regime 1(the RMB exchange rate difference between HK offshore market and onshore is negative, the RMB deposit scale in HK declines, the money supply grows slowly), Regime 2(the exchange rate difference is positive, the deposit scale grows slowly, the money supply grows rapidly) and Regime 3(the exchange rate difference is positive, the deposit scale grows rapidly, the money supply grows rapidly). In the three regimes, the changes of the mainland RMB supply are different.