The Effect Of Economic Uncertainty On The Change Of The RMB Exchange Rate

This dissertation mainly studies the impact of economic uncertainty on the RMB exchange rate.Firstly,this dissertation introduces the basic concepts of economic uncertainty and the transmission mechanism of economic uncertainty to the exchange rate.Secondly,it outlines the main manifestations of the global economic condition and policy and the changes of the RMB exchange rate.Thirdly,empirical analysis tests the uncertainty of the economic situation,the impact of policy uncertainty and economic news on the RMB exchange rate and tests the effectiveness of the intervention in China's foreign exchange market under the condition of exchange rate uncertainty.Finally,the policy recommendations are put forward based on this research.Economic uncertainty affects the exchange rate mainly through the channels of risk diffusion,rational expectation and asset pricing.Uncertainties in domestic economic condition and economic policy include not only the factors that promote RMB appreciation but also the factors that exacerbate the devaluation of the RMB.In this dissertation,we use the time varying parametric factor augmented vector autoregressive model to construct the China's economic uncertainty index,and make an empirical study on the impact of the economic condition uncertainty of China and the United States on the yield of the RMB.Since 2014,the degree of the China's economic condition uncertainty has strengthened.The China's economic condition uncertainty has devalued the RMB,and the depreciation effect has time-varying characteristics.The the economic condition uncertainty of both China and the United States exacerbate the fluctuation of the RMB exchange rate.In this dissertation,we use the TVP-FAVAR model to build the China's monetary policy uncertainty index and fiscal policy uncertainty index.Both the monetary policy uncertainty and fiscal policy uncertainty have depreciation effect on the RMB,and the depreciation effect has time-varying characteristics.In this dissertation,we use Baker et al's economic policy uncertainty index to further examine the the dynamic spillover effects of global economic policy uncertainty on the RMB exchange rate.The empirical test shows that the spillover effect of the China's economic policy uncertainty and the US'economic policy on the RMB is strong,and the spillover effect of the euro area economic policy and the Japan's economic uncertainty on the RMB exchange rate is weak.The spillover effect of the US economic policy uncertainty on the global economic policy is the strongest,indicating that the US plays an important guiding role in the formulation of global economic policies.The spillover effect of the China's economic policy uncertainty on the global economic policy uncertainty and the spillover effect of the global economic policy uncertainty on the China's economic policy uncertainty is balanced.Further analysis of the sources of economic policy uncertainty shows that the China's economic condition uncertainty has a strong influence on the China's fiscal policy uncertainty,and the China's fiscal policy uncertainty has a strong influence on the the China's economic policy uncertainty.This result shows that when the China's economic policy uncertainty is high,the economic authorities tend to implement fiscal policies to reduce the economic condition uncertainty.The China's economic policy uncertainty is mainly due to the fiscal policy uncertainty.In order to reduce the impact of model uncertainty on the empirical results and investigate the impact of unexpected macroeconomic changes on the yield of the RMB,this dissertation studies the impact of the China's and the US' economic news on the yield of the RMB.This article constructs the China's and the US' economic news index and examines the net effect of the economic news on the RMB exchange rate.The study has shown that overestimation of the Chinese economic variables and underestimation of the US' economic variables have a depreciation effect on the onshore and offshore RMB.A study of specific economic news affecting the RMB exchange rate has found that the unexpected increase in new RMB loans has a depreciation effect on the onshore and offshore RMB exchange rate.The unexpected increase of M2 and the unexpected increase of PPI in China and the unexpected increase in ADP employment in the United States have a depreciation effect on the onshore RMB.The unexpected increase in the growth rate of retail sales in China has an appreciation effect on the onshore RMB.This dissertation builds the subjective economic uncertainty index of China and the US based on economic news and empirically tests the influence of the subjective economic uncertainty index of China and the US on the RMB yield and its volatility.It has been found that the subjective economic uncertainty of the US has depreciation effect on the RMB exchange rate and the rise of the China's subjective economic uncertainty have exacerbated the volatility of the onshore and offshore RMB yield.The increase in the subjective economic uncertainty of the US has reduced the volatility of the onshore RMB yield.Finally,this dissertation examines the efficiency of the foreign exchange market intervention under conditions of exchange rate uncertainty.The results have showed that the foreign exchange market intervention has the effect of smoothing the RMB exchange rate changes.The foreign currency purchase operations are more efficiant than the foreign currency sale operations.Foreign exchange market intervention can reduce the volatility of the RMB yiled.The exchange rate uncertainty not only depreciates the RMB exchange rate but also aggravates the volitility of the RMB yiled.