Analyzing The Choice Of Exchange Rate Regimes-Selection Of Macau Exchange Rate Regime

Selection of exchange rate regime(ERR) is one of the popular topics in international financial area.Economy requires an adequate exchange rate regime in different phase.Macau is a miniature economy system,difficult to apply general theories to choose its ERR,with its unique detachment.In this report,I have applied the M_F Model to illustrate the influences to an economy system of different monetary policies,fiscal policies,and international balance of payment,under different exchange rate regimes and different level of capital mobility.The interpretation of M_F Model exists certain limitation,the come out of different policies conjugation is limited by different detachment.According to the article,"How do countries choose their exchange rate regime?- by Poirson",that illustrated the primary factors that affect the choice of ERR,I have explained how they exert their influences through related theories. Concerning Macau's current ERR,I have discussed its reasonableness and continuity through quantitative analysis by applying various pricing level,interest rates level,as well as elasticity of import and export.Whereafter,I have applied a simple macro econometric model to analyze the economic effects caused by Macau's current monetary policies and fiscal policies,and figure out the effectiveness of their policy tools.Finally,I have discussed Macau's current economy,the relationship with its major trade partners and the prospects.Thereafter,I have discussed the feasibility of various exchange rate regimes choice in Macau.The conclusion is that due to the low validity of monetary policy,in addition the exchange rate change is unable to exert its lever's function which supposed to adjust the domestic equilibrium price equal to the world equilibrium price,the floating exchange rate regime is not adequate to Macao.Although the currency board is highly sustainable in Macau,the currency union between Patacas and RMB will be a unique choice in Macau's ERR,as the result of the internationalization of RMB in the coming future.