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Study On Equilibrium Exchange Rate Under Capital Flow And RMB Internationalization

Posted on:2004-12-06Degree:MasterType:Thesis
Country:ChinaCandidate:W XiaoFull Text:PDF
GTID:2156360125455682Subject:Finance
Abstract/Summary:PDF Full Text Request
During latest 1 year, the exchange rate of RMB has been the hot topic. Should RMB Appreciate or remain stable? As a matter of fact, it just shows the discrepancy between current exchange rate and balanced exchange rate. Different with many other developing countries, however, China has surplus both in capital account and current account since 1990s, and this trend will go on because of the sixteenth conference of P.R.C., which drives construction of a well-off society. Therefore, it is not true that the balanced exchange rate of RMB means surplus in capital account and deficit in current account or vice versa. Moreover, RMB has flowed out of China since the Asia financial crisis in 1997, which will affect the exchange rate of RMB out of question. Owing to these new rapid changes, the study of balanced exchanged rate of RMB has realistic significance.Considering of the possibility of continuous capital flow into China, when analyzing the relationship between capital flow and the balanced exchange rate of RMB, the author put forward the concept of moderate net capital flow for the first time. It not only fits with the empirical study but also supplies an easy and good measure to monitor and control the capital flow for the government. The empirical study shows that simulation effect is good. The result is accord with the situation of China.The method of this article is the combination of qualitative analysis and quantitative analysis. Firstly, the article gives an answer to the question whether the RMB rate is balanced by using the supply-demand curve, pointing out that the disequilibrium of nominal exchange rate is inevitable and frequent. Then, the author analyzes the influence of capital flow and internationalization of RMB to exchange rate by using the concept of real exchange rate. And also the author gives an empirical analysis, Which shows that the real exchange rate of RMB depart from the balancedrate. The departure gives room to appreciation of the exchange rate of RMB. The empirical study also indicate that the hot money-partially of capital flow-affect the real exchange rate of RMB but little. The capital flow by commodity trade and government expend affect the real exchange rate of RMB rather great. The internationalization of RMB is affected by nation credit and the state of RMB rate, and the internationalization of RMB has little effect to exchange rate of RMB. At last, the author gives some suggestions about exchange policy, reducing the increasing speed of export trade, government intervention, encouragement of export, improving the mechanism of RMB and promoting the internationalization of RMB.
Keywords/Search Tags:Foreign Exchange Market, Equilibrium of Nominal Exchange Rate, Real Exchange Rate, Capital Flow, RMB Internationalization, Equilibrium of Real Exchange Rate
PDF Full Text Request
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