Research On The Foreign Exchange Rate Determining And Its Framework Of The Stabilizing Mechanism Based On The Dual-function

The foreign exchange rate has been the hot topic problem and one of the important parts in international economics and international finance. This paper researched on the dual-function of foreign exchange rate, the goals of its policy tools, the appropriate exchange rate determining, and the framework of the stabilizing mechanism in theory and practice and proposed some theorems.This paper mainly analyzed the reasons and principle to determine appropriate exchange rate based on dual-function of exchange rate. Following this analysis, this paper discussed the exchange rate determining and adjusting and the framework of the stabilizing mechanism using the game theory. During exploring the reasons to determine the appropriate exchange rate, some theorems for exchange rate are developed. By analyzing the price characteristics of the dual-attribute goods, the author first discovered that the price of the dual-attribute goods has the multi-balances. By researching on the exchange rate decision theory and the its regime transition, that foreign currency have changed from common commodity to the dual-attribute goods gradually was discovered, and the theory of exchange rate dual-function and the empirical analysis were putting forward.The theory of exchange rate dual-function implicates that the real exchange rate depended on the functions of exchange rate in real economy and virtual economy, and the exchange rate has multi-balances. Theory of exchange rate dual-function predicates the exchange rate dilemma: any exchange rate can't carry out both the real economy efficiency and the virtual economy efficiency at the same time. Theory of exchange rate dual-function also implies that the governors can make choice in the exchange rate choosing space. About how the exchange rate to be determined, based on macroeconomic goals in an opening economy, the author believes that the pegged-adjusted exchange rate regime is a good exchange rate regime and that the principle to determine the exchange rate can be maximum by converting human resources into material capital. Combined the practice of determining exchange rate in various areas, the author analyzed how to determine exchange in various modes and how those modes influence their social welfare by the game theory. During interpreting currency crisis, the opinion of this paper is that the fundamental reason of currency crisis is the capital function of the foreign currency and the conflicts of exchange rate dual-function. Based on IS-LM model, the paper constructs a macro-mathematical model to interpret why the currency crisis happens, discusses the important role of controlling capital flows to prevent currency crisis, and gives a threshold value of capital inflows in order to avoid currency crisis. This is a development of the currency crisis theory.Based on the dual-function of exchange theory, the paper analyzes the principles and designs a system framework about how to stabilize exchange rate. By reviewing the evolution of exchange rate regime in various areas, this paper pointed out that the choice of exchange rate regime reflects the process to solve the conflict of the exchange rate dual-function in the real world. The fundamental principle to stabilize exchange rate is to separate the dual-function of exchange rate and to adjust the factors that can influence the exchange rate. The exchange rate stabilization can be realized by controlling the capital flows and risk management. The smooth transition of exchange rate can be reached by indirect controlling exchange rate when the exchange rate needs to be adjusted. Furthermore, the paper proves that the pegged-adjusted exchange rate regime is feasible by the game theory.