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Abstract
This study analyzes how Renminbi (RMB) internationalization policies affect RMB exchange rates between 2010 and 2016 using the VAR (Vector Auto-Regressive) model. The results show that many RMB internationalization policies have distinct impacts on the central parity rate, onshore exchange rate, and offshore exchange rate. Policies have the greatest effect on the offshore exchange rate, followed by the onshore rate, and the central parity rate. Further, changes in the RMB exchange rates can be divided into three stages. In the first stage, as the onshore exchange rate was subjected to the daily trading band at 0.5% around the central parity rate, the onshore exchange rate converged toward the central parity rate. Then, after the central bank widened the band of the onshore exchange rate on April 16, 2012, the onshore exchange rate followed the trend of the offshore exchange rate. After the 811 exchange reform in 2015, the central parity rate dominated the pricing power again.