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This paper studies the Renminbi (RMB) spot exchange rates against USD to test whether the interaction between the onshore and offshore markets is stable. The Granger Causality test and the BEKK-GARCH model are adopted for five sub-periods, and the results show that the spillover effect in mean and volatility differs in different periods. Our results show that hourly data analysis is a better method detecting the subtle changes of the spot exchange rates between the CNY and the CNH markets. There are bidirectional Granger causalities between the CNY and the CNH spot exchange rates in both the entire period and the five sub-periods. When the market volatility is high, the impacts become unidirectional by the onshore intervention. The exchange rate of CNH renders a stronger leading role within the opening year of the offshore market, and then the CNY ones take the guiding role for a long time. The bidirectional interactions between CNY and CNH spot exchange rate reveal the information superiority of Chinese government by edging the CNY market over the offshore one, at the same time, readjusting the exchange rate of the CNY based on the CNH changes in exchange rates in line with market expectations.

Reinvestigation of the Interaction between the RMB Onshore and Offshore Markets: An Empirical Analysis Based on Hourly Data