The Central Bank Sterilized Intervention Policy

Since the floating exchange rate system was put into practice, every countries' exchange rate is wholly flunctuated in frequent and in wide amplitude range. This kind of wave propagation gives the economy much harmful effects undoubtedly. Under this kind of situation, it becomes a international general rule for every Central Bank to adjust its foreign exchange market. At the Beginning of 1994, our country carried the twin exchange rate on one track. So the gate between our exchange rate system and the Central Bank monetary policy is unfolded for the first time.Now, the formation of our interest rate is not sound. In addition, the capital item is in the process of the opening. There is no condition of the entry to bringing the sterilization operation into effect. That's to say, there is no mechanism of the "Interest rate-Capital movement-Exchange rate" . Therefore, the non-Sterilized intervention is invalid. Now, the RMB is not achieved completely convertibility and the capital and property can not be substitute for foreign currency freely. Hence, the Sterilization Operations becomes the main measure to interpose in the foreign exchange market.This thesis is put into two parts:First part is carried on theory analysis. First, it clarifies the meaning of the sterilized intervention on theory, introduces the function of acting mechanism, the advantages and disadvantages of this measure. Then, researching into the formation, the development, the history backdrops, analyzing the applicable condition and comparing the international theory. This thesis also utilize the modern of " Cost-Profit " and the pattern of capital-property to analyzing the validity of the sterilization intervention and provide with theory basis for the better application.Second part analyzing the operation of the sterilization intervention. Because at the moment our domestic situation is similar to the condition of some developing countries' opening time, it is more useful to research their policy practice. Hence in the running research, First to analyze the Taylar's economic model, policy and its effect, Sum up the reason of success or defeat. In view of our sterilization intervention reverse, development and the present situation, along with the limit in the operation of the Central Bank's interpose practice and the policy environmental factor , this thesis put forward the characteristic system conception of our sterilization intervention.