Research On The Effectiveness Of RMB Exchange Rate Regime Reform

On July 21,2005,China began to implement a managed floating exchange rate regime with reference to a basket of currencies,relaxed restrictions on exchange rate regime,strengthened the market adjustment ability to exchange rate fluctuation,and established a more flexible RMB exchange rate mechanism.This is not only an inevitable requirement for speeding up the internationalization of RMB,but also conforms to the reform goal of RMB exchange rate regime.Although China's managed floating exchange rate regime remains controversial in the international foreign exchange market,including whether the "RMB is undervalued" before the exchange reform and whether the "RMB is manipulated" after the exchange rate reform,the practice has proved that,under the effective intervention and management of the government,the marketization of the RMB exchange rate formation mechanism is becoming higher and higher.As an important indicator of China's economic and trade status in the world,the evolution trend of RMB exchange rate has become the focus of global attention and research.In particular,from August 2008 to June 2010,the Chinese government intervened in the RMB exchange rate in a timely manner,and successfully dealt with the harm to our economy caused by the worldwide financial crisis caused by the United States.It can be said that the managed floating exchange rate regime under government intervention is more in line with the requirements of China's rapid,stable and healthy sustainable development,and it can effectively resist the global financial risks caused by external economic turmoil.Since China introduced the new exchange rate system,the RMB exchange rate has shown a trend of unilateral appreciation for most of the time.On the one hand,the appreciation of RMB is an important manifestation of the strengthening of the comprehensive national economic strength and economic status,which is conducive to the expansion of national influence.On the other hand,the appreciation of RMB will inevitably increase the relative price of export commodities and services in the international market and weaken export competitiveness,which will further enlarge the negative impact on China's economic growth.Based on the analysis of the formation mechanism,evolution characteristics and fluctuation effects of RMB exchange rate under the government policy intervention,the paper discusses the implementation effect of the current RMB exchange rate policy under the open economy and its impact on the total value of import and export trade as well as China's economic growth,in order to develop and implement a more reasonable and effective macro-economic operation policies of exchange rate,trade and currency for our country and guarantee the rapid,stable and healthy sustainable development of our economy.The contributions of this paper mainly lies in: Firstly,to measure the degree of marketization of RMB exchange rate,based on the daily exchange rate data of the domestic official exchange rate and the international market exchange rate,the paper constructs the flexibility index of RMB exchange rate,and the measuring results show that the RMB exchange rate has preliminarily realized the formation mechanism of the marketization.Secondly,the paper discusses the characteristics of policy impact in the evolution of the RMB exchange rate,and analyzes the lasting influence of the profound exchange rate regime reform on the evolution trend of the RMB exchange rate by taking advantage of the international advanced structural break unit root test method.In addition,the paper starts from the principle of the impossible trinity,and studies the correlation among RMB exchange rate,import and export trade and economic growth through factor substitution.The empirical test of bilateral trade reality between China and the United States shows that since July 21,2005,the exchange rate policy implemented in China has basically achieved “maintaining the normal floating of the RMB exchange rate in a reasonable and balanced level,maintaining the basic stability of the macroeconomic and financial markets” the target of exchange rate reform,which has played a significant role in promoting the adjustment of China's trade structure and the growth of the national economy.This paper is divided into six parts as follows:Chapter one is the introduction.Mainly introduces the background of selected topic,analyzes the significance of the study of the government intervention characteristics of RMB exchange rate and its influence effect,discusses the choice of exchange rate system and the government's foreign exchange intervention and validity test,and presents the research contents and objectives,research ideas and methods,and the innovation and deficiency of the research.Chapter two is the literature review of basic theory and related research.Focus on the research including the related theories of the exchange rate regime and policy intervention as well as the minimum LM unit root test method.Through reviewing and summarizing relevant basic theories and methods including the construction and deduction of the basic model,the basic relationship and influence effect of exchange rate policy,import and export trade and national economic income are analyzed in depth.It can be seen that,as a new member of the international monetary system,the RMB has become the research focus of the experts and scholars from the beginning,for example,the formation mechanism,fluctuation characteristics and influencing factors,prediction measurement,etc.RMB has become the important factor that affects the international trade and the world economy,and it is one of the most important currencies in the world monetary system.Chapter three focuses on analyzing the selection of RMB exchange rate regime and the course of reform,explains the necessity of the reform of the RMB exchange rate under the great pressure of the international foreign exchange market and puts forward the new characteristics of the gradual reform and development of the RMB exchange rate regime.This part designs a flexible index which can measure the marketization degree of RMB exchange rate by the nominal exchange rate issued by the central bank and the market exchange rate issued by the U.S.federal bank.The index explains the characteristics of the degree of marketization of the RMB exchange rate after several rounds of reform.Results show that the marketization process of the RMB exchange rate formation mechanism and the self repairing function of the market are steadily advancing and improving,and the marketization reform of RMB exchange rate has been effective.Chapter four focuses on the research of the effectiveness test and influence effect of exchange rate regime reform based on bilateral exchange rate of China and the United States.Using the structural break test method proposed by Lee and Strazicich(2003),double-structure breaks test is conducted on the nominal exchange rate and real exchange rate of RMB respectively.It can be concluded that exchange rate policy is an important factor for the characteristics' formation of structural breaks in the process of the evolution of the RMB exchange rate.Exchange rate fluctuations under the influence of exchange rate policy have an important impact on bilateral trade between China and the United States,and the bilateral exchange rate is an important factor affecting the balance of China's import and export trade.Chapter five carries out the research of the effectiveness test and influence effect of exchange rate regime reform based on effective exchange rate of RMB.The paper studies the generation process and computing method of RMB effective exchange rate deeply,and does the double structure mutation test on the evolution characteristics of nominal effective exchange rate and real effective exchange rate of RMB.Results show that the exchange rate policy is one of the important factors for the forming of the structural mutation in the process of the evolution of the RMB effective exchange rate,and the effect of world economic and trade conditions on the evolution of the RMB effective exchange rate is also very large.The effective exchange rate is an important factor for China's import and export trade,and exchange rate policy can indirectly affect China's import and export trade by affecting the effective exchange rate.Chapter six is the conclusion and research prospect.Summarizes the research content,puts forward some suggestions for further deepening the reform of the exchange rate system,and provides a reference for the future research work.