Exchange Rate Appreciation, Expectations And Monetary Policy: Historical And Empirical Research

With the expansion of trade surplus since 2002, the pressure of RMB appreciation is more and more obvious, and accompanied by a strong appreciation expectation. The situation is similar with Japan and Germany's in the 1970s and 1980s, which especially has a very big similarity with Japan in many aspects. At the background of domestic currency appreciation, the two countries adopted different monetary policies, they had quite different economic performance. Based on the reasons above, studying exchange rate appreciation,exchange rate expectation and monetary policy to provide policy advice for monetary authority has important practical meaning.There are six parts in the article. The first part introduces the background, significance, literatures, innovation points and so on. The second part reviews the changes in the spot rate and expected exchange rate of Japanese yen and Deutsche Mark, analyzes Japanese and German authorities'monetary policies and economic performance, and summaries the experiences and lessons of monetary policy operation in appreciation process in Japan and Germany. The third part analyzes the change of RMB exchange rate and exchange rate expectation, outlines the operation of monetary policy in China by phases and general characteristics of monetary policy operation. The fourth part has a theoritical analysis of the spot exchange rate, exchange rate of expectation, and monetary policy based on uncovered interest rate parity theory and the monetary model which includes exchange rate expectation. The fifth part develops VAR models based on theory models to have empirical studies by using the 1999-2010 monthly data and 1999Q1-2010Q2 quarterly data of china. The sixth part gives suggestions according to experiences and lessons of monetary policy operation in Japan and Germany, the situation in china and the results of empirical studies.