Research on dynamic structure of the exchange rate volatility network among the Belt and Road countries based on spillover effect

The countries taking part in China's 'The Belt and Road' Initiative have achieved greatly increased trade volume and become more firmly interconnected since the initiative was launched in September 2013. This paper researches the exchange rate volatility features among 15 countries along the Belt and Road region with the network analysis based on spillover effect. A directed network is constructed to show not only the impact one currency having on and received from the other currencies, but also the net effect from one currency to another in the network. The importance of any currency in the network and the total interconnectedness of the whole network can also be obtained. Furthermore, a 200-day rolling window analysis is used to show the dynamic evolution trend of the network. The results show that after the launch of the Belt and Road Initiative, both the interconnectedness of the exchange rate volatility network and the importance of CNY increase. In addition, the importance of most currencies in the network has been quite volatile.