Study Of The Rmb Exchange Rate Policy Under The U.s. Dollar Hegemony System

The RMB exchange rate has been a hot topic both theoretically and practically,but most literature ignore the fact of U.S.dollar hegemony in today's international money system.This dissertation starts from the international environment of RMB exchange rate policy,in accord with its inside elements,study its micro foundation and macro models,then discuss its object.After positive analyses the effects of RMB exchange rate adjustment,we draw the conclusion.Chapter one is an introduction,including the background and realistic meanings of this article.Chapter two is the international environment of RMB exchange rate policy.The Bretton Woods System marked the beginning of dollar hegemony,but the latter did not end when the Bretton system disaggregated in 1970s.This chapter reviews the historical process of dollar hegemony and its evolvement,expatiate its meaning and function,and demonstrates that there does not exist the so called New Triffin Dilemma.Chapter three is the inside elements of RMB exchange rate policy.Current surplus and FDI swarming reflect the two basic problems of China,one is internal export,the other is foreign capital substitution.Chapter four is the micro foundation of RMB exchange rate policy.Dollar hegemony means most firms in most countries use U.S.dollar as the pricing money in their international trades.This will make the exchange rate vary can not transfer to price fully.This chapter uses the data in Sino-American trade to get the transfer ratio,and analyses why the ratio is so low.A social investigation was also made to prove the result.Chapter five introduces four milestone theoretic models of exchange rate economics, and analyses corresponding RMB exchange rate policy.1)According to the Mundell-Fleming Model,exchange rate policy is to choose among fixed exchange rate,freely capital flow and independent money policy;2)In term of the Dornbush Overshooting Model,the effect of money policy is only short term price rigidity and nominal exchange rate overshoot,which challenge the validity and independence of money policy;3)According to the Redux Model of New Open Economy Macro Economics,floating of exchange rate will not affect the well being of home and foreign countries,but its assumptions are obviously not suit to China;4)When we consider the dollar hegemony in the NOEM baseline model,we can get the conclusion that fixed exchange rate is the best policy of China.Chapter six is the object choosing of RMB exchange rate policy.We point the two problem of traditional exchange rate object:1)the equilibrium exchange rate is a passive variable which depends on the macro economy variables;2)the objects of all countries are the same,no matter the country is developed or developing.In fact, internal balance is more important than outer balance,and the exchange rate policy are not symmetrical between the U.S.and other countries.The basic problem of Chinese economy is lack internal demand.Therefore,the object of RMB exchange rate policy should be increase output and employment,promote the economy to be internal balance,and achieve outer balance in the last.In today's international money and finance environment,it is difficult to devalue the RMB,but we should hold it stable.Chapter seven studies the effect of adjusting RMB exchange rate.Through theoretical analyses and positive test,we find:1)the broaden of RMB exchange rate floating will impair the export of low adding value labor-intensive products;2)the appreciate of RMB will reduce employment;3)long term appreciation of RMB will lead to appreciate anticipation,which will impel the capital price higher,attract foreign hot money in flowing and promote the exchange rate appreciate even more.Therefore the appreciation and floating of RMB is not a suitable policy to China.Chapter eight is the conclusion.By the analysis before we can draw the conclusion that holding RMB exchange rate stable is the best choice of Chinese exchange rate policy.Exchange rate is more a political than a economy problem in the dollar hegemony system,and RMB appreciate can not reach the authorities' objects.We should use RMB exchange rate as an economy lever to serve Chinese benefit.In order to reduce the pressure of large current and capital surplus,we can use trade war in place of exchange rate war in the short term,and the RMB internationalization is the ultimate method in the long term.