Spillover effect of the RMB and Non-USD currencies after the COVID-19 pandemic: Evidence captured from 30-minute high frequency data

Amid the faster- and wider-than-expected spread of COVID-19, which has added new twists to the global economic outlook and profoundly impacted the performance of major currencies around the world, the RMB has been performing well, and thus, its market standing has improved. However, uncertainties about the future pose enormous challenges to the RMB internationalization. By processing 30-min high-frequency data, this paper aims to study changes in the characteristics of the relationship between the RMB and other non-USD currencies at five stages of the pandemic, first by means of auxiliary regression analysis, in which the pandemic is accounted for with a dummy variable, and then with a VAR-BEKK-GARCH model. The research shows that since the latter stages of the global pandemic, significant negative spillover effects among major non-USD currencies can be observed, while the independence of offshore RMB has increased gradually, and there have been weakening trends in the sustainability of the mean spillover and volatility spillover effects among other currencies. As the “regular pandemic prevention and control” begins to take hold in China and the geopolitical uncertainty increasingly outbreaks, the top priority in global currency market should be to resist the pressure of RMB independence with policy changes and increase caution in investing RMB assets.