Author(s)

Liang Xing and Xiaoyu Wang

Corresponding Author

Liang Xing

Abstract

This paper analyzes the data of the central parity rate and opening, closing prices of RMB against US dollar, then establishes the TARCH model of the central bank how to intervent the RMB exchange rate fluctuation base on the fluctuation characteristics of RMB exchange rate. Through the empirical analysis of the fluctuation of RMB exchange rate, concludes that the "leverage effect" is caused by the fluctuation of RMB exchange rate in two stages. Meanwhile analyzes the linkage between the central bank and the fluctuation of RMB exchange rate, which obtaines the empirical results of the TARCH model on the fluctuation of before and after the RMB exchange rate reform. Finally, conclude the real RMB exchange rate formation mechanism by comparing the estimated results of TARCH model and try to put forward the policy recommentdations for the reform of the RMB exhcange rate formation mechanism.

Keywords

Exchange rate formation mechanism, Exchange rate reform, TARCH model, Closing price