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Does the Pricing Power of RMB Interest Rate have the Risk of Falling Abroad?
Pages: 33-44
Year: Issue:  4
Journal: Nankai Journal(Philosophy,Literature and Social Science Edition)

Keyword:  Onshore-Offshore MarketsLinkageInterest Rate Pricing PowerDirected Acyclic Graphs;
Abstract: In recent years, with the acceleration of RMB internationalization and the gradual opening of onshore market, the efficiency of capital flows and information transfer between domestic and foreign RMB markets has been further improved and the link between onshore and offshore RMB interest rates has been strengthened. Therefore, it is of significance to discuss the ownership of the pricing right of RMB interest rate. Using Directed Acyclic Graphs(DAG)and recursive forecast error variance decompositions, we find that although onshore market mostly holds interest rate pricing power, the offshore market has a greater influence than onshore market since 2017, and the risk that onshore market loses interest rate pricing power does exist. We should pay attention to strengthening the construction of onshore market so as to firmly control the pricing power of RMB interest rate. In addition, the relationship between domestic and overseas RMB interest rates is closely related to the foreign exchange market, the regulatory authorities should coordinate the supervision of relevant financial markets to avoid interest rate risks.
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