Analysis Of Macro-control Efficiency From The Perspective Of The Exchange Rate Regime

There are two hotspots in China's economics:one is to enhance macro-control effect, and the other is to improve the RMB exchange rate formation mechanism.And these two hotspots have many immanent relations.From the perspective of practice of economic development and reformation in China,the first hotspot should be the significant goal of the second one.And the second hotspot is,in turn,conducive to the first one.Since 2002,Chinese economy has greatly speeded up esp.during 2003-2005,with GDP growth rate 9%,9.5%and 9.9%respectively.In this period,macro-control being performed incessantly,in fact,economic history growth rate was rather high—that was the first economic overheating since China's reform and opening to the outside world.It's not difficult to discover that there are many inconsistencies in Chinese economy.For instance,from the perspective of macro-economic policies,in light of the phenomenon of severe investment expansion,economic overgrowth,and obvious inflation,interest rates should be raised without hesitation(for we're in a period of low interest rate). Notwithstanding,we are in shackles in the appreciation of RMB exchange rate and the low interest rate of US dollar.And thus we're not able to raise interest rates enough so as to control the expansion of fixed assets investment.For one thing,in that raising interest rates will consequentially allure more international hot money movement into China and gamble on the anticipation of RMB appreciation,which will bring more and more pressure of appreciation to RMB.For another,actual exchange clearing system will transform the pressure of appreciation to the release pressure of basic money,which will result in further increase of pressure of inflation.These inconsistencies undoubtedly restrict our choice of macro-control policies instruments(exchange rate instruments and interest rate instruments)and restrain policies instruments to take effects as well.By means of deep analysis,we deem that the incongruence between the exchange rate regime and macro-control policies results in aforementioned inconsistencies and debase macro-control efficiency.According to all these,it's of great significance to research on Chinese macro-control efficiency starting from the research of exchange rate regime.This dissatisfaction proposes an analysis framework of the exchange rate regime based on macro-control efficiency,and the framework involves the following:①To appraise macro-control efficiency from the perspective of the exchange rate regime;②To analyze the cause of macro-control inefficacy from the perspective of the exchange rate regime.There are two ways:one is to demonstrate whether the ongoing exchange rate regime is sustainable;the other is to research the compatibility between this system and macroeconomics and macro-control system.③To research the efficiency of fiscal and monetary policy,as well as its contrast with other exchange rate regimes,under the circumstances of the sustainable exchange rate regime,④To research the path of facilitating the compatibility between exchange rate regime and economic environment,such as increasing exchange rate elasticity.Under the aforementioned research framework,conclusions drawn from this dissertation are as follows,(1)As a whole,Chinese macro-control efficiency is satisfactory.However it is rather bad from the perspective of the exchange rate regime.(2)By mathematical model building,it's strictly demonstrated that the condition under which the mid exchange rate regime exists is that capital flow is controllable.This conclusion theoretically negates the "polarization Theory" on selection of the exchange rate regimes,and supplies significant theoretical supports for China to employ the managed floating exchange rate regime.We think that exchange rate elasticity must increase along with the increase of capital flow,and capital flow consequentially increases along with Chinese economic growth and further opening to the outside world. Consequently,in the long run,floating exchange rate regime is an inevitable trend.(3)Approaches on evaluating the feasibility of exchange rate elasticity are researched, and impulse response function as well as variance decomposition are employed for empirical analysis.There're no correlative research achievements so far.Either to enhance the sustainability of the exchange rate regime itself or to swell the compatibility between it and the economic environment,exchange rate elasticity should be the emphasis of consummating RMB exchange rate formation mechanism in China nowadays. This dissertation supplies an approach for evaluating the feasibility of the extent of exchange rate elasticity adjustment.Hence,this research is of great importance.(4)In the field of the mid exchange rate regime,the Mundell-Fleming model—a famous and classical model for analyzing macro-control effficiency—is further developed, including classical Mundell-Fleming model as well as its development within asymmetry in interest rate and capital flows.We propose that as a country that employs mid exchange rate regime,China has to attach more importance to the coordination of policies,as neither the fixed exchange rate regime nor the floating exchange rate regime may have invalidation while the mid exchange rate regime doesn't,and its efficiency of fiscal and monetary policy lies between the fixed exchange rate regime or the floating exchange rate regime.(5)The principle of RMB exchange rate formation mechanism on macro-control efficiency is studied.