Research On The Exchange Rate Regime Under International Capital Flow

Today world is opening world, so the choice of exchange rate regimes is very important for every country. Basing on different economic conditions, countries adopt different exchange rate regimes. Reasonable exchange rate regime is in favor of accelerating the development of economic and achieving the domestic and international economic counterpoise goal. China began to carry out an economic reform from 1978, and formed an appropriate exchange rate regime after about twenty years' development. Starting from July 21, 2005, China adopted a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB was no longer pegged to the US dollar. China successfully realized convertibility of RMB in current account since Dec. 1996, since then, the speed of flowing freely of capital has improved gradually in China. With the enlargement of international trade, the enlarging scale of international capital flow and the flourish of foreign exchange market, international capital flow show more and more influence to the exchange rate of RMB, and the center bank finds it is much harder to keep a steady exchange rate. Therefore, it's very important to take research on exchange rate regimes on the basic of international capital flows.With reference on literature, the paper analyses the new characters of capital flow, especially the character of the structure. Then the paper applies correlation analytical tools to investigate the relationship between the international capital flow and exchange rate regimes in China, and the correlation analysis indicates that relationship between them is significantly positive. In order to find the correlation between international capital inflow and effect of exchange rate policies, the paper applies the game theory in finance, and gets the conclusion that the independent floating is the best choice of the central bank.