New Exchange Rate Theory

Since the model of traditional exchange rate theory has not passed the experimental test, economists are compelled to find out some new theory to explain the exchange rate behavior. Method that applies market microstructure approach to the research of exchange rate has been improving recent years. Different from the traditional exchange rate theory, this kind of new theory pays much more attention to the key role of the market institutional character in the determining of exchange rate.In the year 2005, the institution of Market Maker was tried out in Chinese foreign exchange market, which was a very important move of the reform of Chinese foreign exchange market. Among all the problems of China'economic development, the adjustment of financial structure is one of the key problems that relate closely to the health and continual development of Chinese economy, meanwhile, the reform of Chinese foreign exchange market is one of the key problems in the adjustment of financial structure. Under this circumstance, the research of basic exchange rate theory should aim at providing effective theoretic reference and policy foundation for the adjustment of financial structure. The new exchange rate theory that developed rapidly recent years and that succeeded in passing the experimental test might provide some theoretic reference for the reform of Chinese foreign exchange...