Research On The Exchange Rate Target Zone Of RMB

The choice about the exchange rate system has been the topic of debating endlessly in international finance field all the time, especially since the middle period of 1990s when financial crisis take place ensued in every new developing economy. There are numerous discussions about the question in international academia, though the reasons that each side listed have nothing in common with each other, but the acknowledged one is that it is certainly problematic that these countries implement pegging exchange rate system while international capital trade is highly developing. The paces of reform and opening-up are being accelerated constantly, China has already been the fourth in the world in trade, the opening to the capital item is the trend too, but the floating exchange rate system based on market supply and demand of RMB has too much " management "but less " float ", so that IMF deems the system pegging. In this case, the direction where RMB should take is becoming one focus of discussion. Analyzed the pluses and minuses of different systems of exchange rate, according to the real state of China and trend of the world exchange rate system reform, this paper puts forward the direction of China's exchange rate system reform ---Setting up the exchange rate target zone of RMB. The paper sets up the equilibrium rate of RMB with BEER based on the nominal rate, considering that the important influence of the item of the capital. This paper also has confirmed the key element of economy chosen are remarkable variable as for the influence of the exchange rate. Using H-P method to strain the trend of variable gets the equilibrium rate of RMB. Find the misalignments between the nominal rate and BEER always existing, and it becoming smaller and smaller since 2000, the nominal rate of RMB does not need appreciating or devaluing. Combined the exchange rate mechanism of European Monetary System and the impact to the exchange rate of various countries of the Southeast Asia financial crisis took place in 1997, this paper uses the impulse response functions to analyze the whole impact to the exchange rate from the cointegrating variables. According to China's present actual conditions, this paper draws a conclusion the target zone should include open zone and secret zone, and discusses the standard when the Central Bank should intervene the exchange.