| Started from scratch and switched from direct control to indirect control since1984,China's monetary policy has basically adapted to the needs of economic development.As an essential macro-control instrument of aggregate demand and counter-cyclical operation,the monetary policy has been greatly improved in terms of its perspectiveness,technicality and flexibility.However,in order to stabilize the exchange rate and to maintain the independence of monetary policy,China imposed strict regulation on capital flows for a long time.With the increasing economic openness,channels and sizes of capital inflows have increased rapidly,which has resulted in frequent conflicts between monetary policies and exchange rate policies in the late 1990s,and thereby restricted the impacts of monetary policy to some extent.When international financial crisis broke out in 2008,Chinese government was steadily pushing forward the economic and financial reforms,and enhancing the efficiency of monetary policy regulation.The Chinese government decided to start the internationalization of RMB for getting rid of the plight of long-term dependence on the U.S.dollar.The internationalization process which started from the RMB settlement in cross-border trade,go smoothly for years,and RMB has already functioned as the settlement currency,the investment currency and the reserve currency.Meanwhile,the scale of cross-border RMB flows has been rapidly expanded.Suddenly,there was widespread optimism in the RMB,arousing the overconfident statement like"yen will be overtaken by RMB in three years and dollar will be overtaken by RMB in ten years".Nevertheless,after the reform on August 11,2015,the exchange rate of Chinese currency experienced a nearly uninterrupted path of depreciation,triggering a large amount of capital outflow.It not only has postponed the internationalization progress of RMB,but has also exposed Chinese financial market operation to huge risks.While on the other hand,it is a suitable time to calmly address the issues of RMB internationalization.In fact,monetary internationalization is not a free lunch.RMB Internationalization may bring seignorage,reducing exchange rate risks and other interests in the future of China.In the meantime,the free movement of capital,the opening of financial markets,and the disappearance monetary barriers will continue to change our mode of economic operation and the operation of macroeconomic policy environment,furthermore,it will greatly increase the difficulty of monetary policy,so as to affect national macroeconomic stability and safety.Therefore,study on the rational path of RMB internationalization as well as the impact of China's monetary policy which might formed,seeking strategies to improve regulatory efficiency are necessary.On the basis of existing research results and relying on the theoretical framework of monetary policy analysis under open economic conditions,this dissertation consisted mainly of three parts:the advancement of the RMB internationalization process,the impact of various shocks on monetary policy and the adjustment of China's monetary policy response.All parts of the work and achievements are as follows:Firstly,in this dissertation we systematically introduced the relevant concepts of the RMB internationalization,the foundation background,the obtained progress and the fluctuations,and pointed out that the RMB internationalization was to a critical node and needing to coordinate the deepening financial reform with the RMB internationalization,as the scale of cross-border RMB flows continued to expand and that the most important thing was to achieving the RMB capital account convertibility?capital free flow?and to making the exchange rate float completely.In order to answer the academic debate on the order of the two reforms,in the dissertation we used the modeling and analysis method of the system dynamics flow into the tree step by step to construct the simulation model including the cross-border RMB flow factor,for analyzing the interactions of the capital Liquidity,the stability of the RMB exchange rate and the independence of monetary policy and the impact of BOC Cross-border RMB Index changes on each target in the initial stage of the RMB internationalization when cross-border RMB flows on a large scale.The simulation results showed that under the dual channel of cross-border capital flow,the three policy objectives composed of capital free flow,RMB exchange rate stability and monetary policy independence could not be achieved simultaneously,and trilemma was still established.Therefore,according to trilemma,we believe that the path of financial reform that we can realize the convertibility of capital account firstly,and then realize the floating of RMB exchange rate is not feasible.In order to steadily promote the internationalization of RMB,the reasonable path of financial reform should be that the exchange rate is fully floating before the capital account convertibility can be realized..Secondly,In this dissertation,Based on the small country model built by Gali?2005?[1],the medium model built by Chen Shi?2015?[2]and the model of two countries established by Zhang Lian?2015?[3],we establish a dynamic stochastic general equilibrium model?DSGE model?for both countries under the open economy with an exact definition of currency internationalization index.In this model,we defined the currency internationalization index??9?as the proportion of currencies of country A in the currency basket of representative families of country B,which was used to measure the degree of internationalization of currency in country A.We also defined??9?as a percentage of products from country A in total consumption of representative families in country B.Through econometric analysis,we used the actual data to estimate the parameters,and got the regression equation between??9?and??9?.And we introduced currency internationalization into the DSGE model of the two countries under the open economy by introducing??9?into the utility function of representative households in country B.Then we set the monetary policy rules of the central bank,and combined the existing research results and the economic reality in China to calibrate the model parameters.Finally.we analyzed the effects of technology,interest rates and monetary shocks on the major macroeconomic variables of the two countries and the corresponding welfare changes in every stage of the RMB internationalization process when the central bank adopts different monetary policy rules.The simulation results showed that under the condition of foreign interest rate rules,China's monetary policy rules should change from money supply rules to interest rate rules in order to reduce the welfare loss and control inflation and output fluctuation,with the deepening of the internationalization of RMB.The simulation results also indicated that if domestic and foreign monetary policies were coordinated,the welfare losses of both countries could be reduced at the same time.Thirdly,according to the simulation analysis based on DSGE model,this paper argued that firstly,China's monetary policy should change from quantity to price control in the stage of RMB internationalization:we could improve the interest rate transmission mechanism and form a regulatory mechanism for open market operations,short term interest rates,medium and long-term interest rates and currency stability,taking currency stability as the final goal,interest rate as the intermediary target,open market business as monetary policy tool.Secondly,according to the experience of the United States,the monetary policy of the issuing countries of international currency has"spillover effect",and the monetary policy of the affected countries has a"feedback effect"to the United states".After the internationalization of RMB,China's monetary policy would also face the dilemma of internal and external choices.At that time,we should focus on stabilizing the domestic macro economy and take into account the interests of other countries.At the same time,it would be necessary to strengthen the international coordination of monetary policy,and choose a relatively reasonable coordination according to different objects.If monetary policy would be coordinated globally,together with the developing countries,we should promote IMF to form a fair and reasonable monetary policy coordination mechanism.And we should adopt a competitive coordination with United States,Japan and other international currency issuers and cooperate with other small economies in a cooperative way. |
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