The Research On Coordination Between Exchange Rate Policy And Monetary Policy Of Our Country Under Open Economy

The equilibrium conflict between inside and outside is the important issue which the open economy faces. In order to realize the economy reasonable opening, the economy inside and outside should be carried on the management and the coordination. Since 1994, along with our country market mechanism establishment and opening to the outside world degree deepening, the exchange rate, the international payment balance are day by day close with the domestic economical movement, the exchange rate policy (main function in exterior equilibrium) and the monetary policy (main function in interior equilibrium) play more and more roles in maintaining equilibrium, but the conflicts is also increasing.By now, there are three bigger conflicts:the first conflict is suppression bloating monetary policy and suppression Renminbi revaluation exchange rate policy from 1994 to 1996; The second conflict is steady monetary policy goal and suppression Renminbi depreciation exchange rate policy from 1998 to 2000; the third conflict tis the control inflation monetary policy and maintenance stabilization of exchange rate exchange rate policy from 2001 to 2008. The frequent conflict causes the method more complex, when our country carrys on the macroscopic economical regulation, the regulative policy display space receives limits and often falls into the policy predicament in a dilemma. Therefore, it is becoming an unavoidable issue for the authority to fundamentally carry on coordination between the exchange rate policy and the monetary policy conflict.This study from the inner link and function mechanism between monetary policy and the exchange rate policy, according to the succession,analyzes history evolution of our country monetary policy and the exchange rate policy conflict, through representation description, the main reasons of our country exchange rate policy and the monetary policy conflict mechanism will be summarized as the following:inherent contradictions between stable exchange rate level and money supply goal; Our country interest rate - exchange rate linkage mechanism malfunction; Capital control expiration etc.,.As one special tool regulating exchange rate and currency supply and realizing double steady, the sterilized intervention has become an important policy choice to realize internal-external equilibrium. From the practice of the conflict between Current coordination exchange rate policy and monetary policy, the sterilized intervention with the foreign currency buffers properties became the main means of the monetary authorities adopted by our country too. In order to prove the validity that our country made use of sterilized intervention to coordinate the conflicts, through setting up the reaction function of Central Bank and the estimating coefficient of sterilization, the thesis analyzed the effects of sterilized intervention on monetary policy monetary supply from 1994-2008. The conclusions are that Central Bank by means of effective ways such as rediscount, re-lend etc, sterilized the currency increased passively for stabilizing the exchange rate while carrying out sterilized intervention, which has coordinated the conflict to a certain extent between the exchange rate policy and monetary policy. Another key problem is whether the sterilized intervention can continue.This text based on the scholar of Japanese Ito's (2002), estimated the increase and decrease intervened since 1994. The sterilized intervention really brought big intervening cost to Central Bank.. The author by the measurement analysis of the macroscopical effect thought sterilized intervention has played an important role in reducing the exchange rate risk of the microeconomy subject, keeping the exchange rate of RMB relatively stable, inhibiting the inflation, keeping our country's exporting the competitiveness. Therefore the author proposed that the sterilized intervention should be regarded as macroscopic control tools keeping the stability of financial market and coordinating the conflicts inside and outside, but not regarding own direct increase and decrease as the discrimination standard that the policy is operated. From the point of view, the sterilized intervention is very constant and can also explain the reasons of our country monetary authorities favor on foreign currency sterilized intervention partly. Of course, all these do exist under the condition of the present exchange control condition and macroscopical environment of outside unchangeable. With the weakening of market-based promotion and system factor helping to the sterilized intervention on a large scale, the tool of sterilized intervention will be more and more fragile.The sterilized intervention is just one short and transitional measure, which has effectively relaxed the conflict of monetary policy and exchange rate at the time and paid high cost, such as delaying the paces of market-based reform and settlement of out-of-balance problem of outside. Looking back conflicting with monetary policy to our country's exchange rate policy, It is an inevitable choice to reform exchange rate forming mechanism of our country in long-term and to make it floating exchange rate to dissolve of conflict effectively. On the premise of considering the sterilized factor at the same time, the thesis established a theory model of exchange rate system choice based on the minimize losses of Central Bank. The conclusions are that with the intensification of the degree of opening of the capital, keeping the independent monetary policy required the system of exchange rate to move towards floating. I have also designed our country to withdraw from a close watch on exchange rate system singly, move towards the floating exchange rate of management, and have discussed the major match policy that should be noticed in changes.Finally, on the brief foundation of summarizing the conclusion of the full text, the author put forward that short-term regulation and control and long-term mechanism's reform of coordinating exchange policy and monetary policy should be simultaneously moved forward in step and bring out the best in each other. We should continue reforming the management policy of the foreign exchange reserve, developing business of foreign exchange market and disclosing the market operation, developing the ways to improve the sterilized intervention. In addition, it is the effective method to coordinate conflict to establish the linkage mechanism between interest rate and exchange rate.