Study On Exchange Rate Target Zone Of RMB

Exchange rate is important to manage national economy. With the economic globalization and financial libernalization as the main means of controlling and economic lever in nation's macro economy the exchang rate has acted more and more obvious function to nation's economic development.The change of exchange rate will influence largely on economic of China, but exchange rate mechanism is more important than realignment of exchange rate. Since the Financial Crisis in Asia, the issue about RMB exchang rate policy have never stopped: After several years from the Financial Crisis in Asia, most domestic and international scholars have anticipated RMB would depreciate; Since 2002, the noise expecting RMB will appreciate gradually upswinged; The world include seven west countries at all times criticize China 's exchange rate mechanism,they deem China's exchange rate pegs US dollars and the regime affects not only harmony of world economic but also the validity of China's monetary policy. So we are confronted with a fundamental problem: Whether China's exchange rate mechanism is needed to adjust or not, and what is the innovation direction of the mechanism? On the basis of analysing advantages and disadvantages of current RMB exchange rate mechanism, this thesis proposes that RMB exchange rate target zone will combine with stabilizing the exchange rate level and strengthening independent of monetary policy, so it is a feasible exchange rate mechanism under the economic environment that China opens further. On the basis of equilibrium exchang rate model in developing country—BEER(behavioral equilibrium exchang rate), this thesis uses Chinese macro economic data from 1984 to 2004, according to ADF Unit Examination and Engle-Granger Two Foot Works Cointegration Analysis, chooses main economic factors that affect RMB exchang rate, establishes RMB equilibrium exchang rate model(BEER) and Error Correction Model(ECM); And on the basis of equilibrium exchang rate model (BEER) evaluates the misalignment of RMB equilibrium exchang rate. And the empirical research shows that : (1) Conditions of trade, net foreign assets, ratio of non-trade product price to price of the trade product impact on RMB equilibrium exchange rate positively. ratio of non-trade product price to price of the trade product is the dominant one in all factors, and its elastic coefficient is up to 1.349091. The change of currency supply impacts on RMB equilibrium exchange rate negatively. (2) Since the exchange rate was merged in 1994, the fluctuating of RMB real effective equilibrium exchange rate obviously reduced. The RMB equilibrium exchange rate kept the steady appreciation trend basically during the period of 1995 to 2002 ( except 1999), and nearly appreciates by 2% every year on average. Main strength of promoting the RMB equilibrium exchang rate to appreciate is the relatively significant progress of productivity of trade product department in China and lasting inflow of FDI in the same period . After 2003, because the real effective equilibrium exchange rate was affected by the depreciation of US dollars, RMB was underestimated. On the settlement of RMB exchang rate target zone band, this thesis bases on Cukierman model. According to Cukierman theoretical analysis results and the historical law of the international exchange rate regimes over half of a century this thesis suggests that the band of RMB exchang rate target zone should be ±2.25%. With the marketization of interest and the open of capital items, this band will be widened gradually. But it should not excess ±4.5% in short time. To maintain the exchange rate target zone, direct intervention and indirect intervention should be applied together.