Effectiveness Of The System Of Managed Floating Exchange Rate

The research on the selection of exchange rate regimes effectiveness is one of the most hot issues of international finance. At the same time, the reformation and improvement of the regime of Renminbi is one of the important macroeconomic policies. The current currency system gives every country autonomy to choose different exchange rate regime. Right choice of exchange rate regime brings great benefit in realizing its inside and outside equilibrium and can help improve economic development. RMB exchange rate regime is to be perfect as the development of our country's economics. During the beginning of 1994 to 21St july,2005, china has adopted one fold. market supply and demand based, managed floating exchange rate system. In this period, the RMB exchange rate has experienced both depreciation pressure in Asia financial crisis of 1997 and appreciation pressure since 2002. Except for a little appreciation few years later the reform of 1994, the rate is always in an excessively stable situation ,basically keeping 8.28yuan/dollar. The new exchange rate regime on July 21st, 2005 is the beginning of the new round of RMB exchange rate regime. Exchange rate regime transition must keep the step of economic regime transition as an important part of economic regime. This paper tries to analyse current exchange rate regime through the contrast with international exchange rate regime. At first this paper gives an overview of the development about the exchange rate, and then analyses the transition of RMB exchange rate regime. Based on understanding the important meaning about the new exchange rate regime, this paper shows that the current exchange rate regime is valid, at the same time, this paper analyses current exchange rate regime from the aspect of international exchange rate regime developing tendency, the shortcoming of current exchange rate and economic internationalization. International exchange rate regime shows the choice of the exchange rate regime is a dynamic transformation. The shortcoming of current exchange rate is that it is so ambiguous that results in people's unstable expectation. From the economic internationalization, this paper points the lagging of exchange rate regime transition. RMB exchange rate regime will finally choose floating exchange rate regime with the realization of the free flow of international capital. The exiting way should be gradual and China should not be hurry to proceed to the innovation of exchange rate regime because it is not qualified to float freely over a long time. The conclusion of empirical study is that the proportion of U. S. dollar in the basket is still very large, but it reduces gradually and the proportion of other currencies is increasing. This reflects the principles of initiative, controllability and gradualness during the course of the reform of RMB exchange rate regime. The author holds that: we should expedite the reform of RMB exchange rate regime on the foundation of these "three principles" and other measures which match the reform of RMB exchange rate regime, which will pour much more new power into economic growth of our country in the future.This paper is composed of seven chapters: Chapter 1, Introduction, this paper is mainly on the background and significance of the results of previous research and literature, the research and innovative views. Introducing some classical writers theories such as Karl Marl etc. on the management of the floating exchange rate system to choose some of the theories, and the theoretical circle the view of some scholars In recent years, On this basis that the RMB exchange rate must implement a managed floating exchange rate system, and a greater choice of free-floating space the future direction of reform. Chapter 2, the choice of exchange rate system to make the relevant theoretical description recalled the exchange rate system of classification and analysis in the academic community are concerned about the Several of the largest concerns focus , including fixed and floating,over this intermediate system disappear theory,Trilemma other. On this basis, and then analyzes the management of the floating exchange rate system of the main characteristics of the exchange rate system changes that the overall trend. Chapter 3, recalled the RMB exchange rate system reform course. Analysis of the current RMB exchange rate system formation process and background, focus on reviewing the changes in China's exchange rate system in the process of two important stages, the first stage of exploration. This process of the RMB exchange rate system is not clear, there is no one set of goals. The second stage carried out floating exchange rate system stage. That is, since 1994, the beginning of China's exchange rate system reform. Although in 1997 after China's exchange rate system performance as being fixed to the dollar feature But basically practiced is a managed floating exchange rate system in China. Only then influenced by surrounding international financial environment and the Southeast Asian financial crisis, so the current exchange rate system show too much stabilizition, too small floating characteristics. The chapter also researched from China's actual conditions and world economic environment inspected the country's exchange rate regime change and a variety of factors. of the July 2005 exchange rate reform, China is the realization of a managed floating exchange rate regime choices. Chapter 4, which is the main body. from the classical writers to explore the theory of China adopted a managed floating exchange rate system based on the theory. China's economic success is one of the factors of the RMB exchange rate system selection, RMB exchange rate system in practice on the validity of it is the theoretical basis for the scientific nature. China's exchange rate system in practice has been successful. mainly because such a system consistent with the theory of Marxism and other classics's brilliant thesis, This is the contemporary theory of the monetary system to fill and innovation. Analysis of the major Marx, Adam Smith, Keynes's classics such as some countries on the exchange rate system to the effective management of economic thinking, from the perspective of national sovereignty, the independence of monetary policy perspective, government management perspective and appreciation of the RMB credit to analyze implement a managed floating exchange rate system based on the theory, with a view from the right to find practical policy guidance in the selection process. Chapter 5, Singapore and India through the reform of the exchange rate examples to prove that the choice of a managed floating exchange rate system on the effectiveness of the developing countries on the success of the reform process and the experience of the Enlightenment to China. Chapter 6 of the existing managed floating exchange rate system, adopted on the current exchange rate of the operation, China can be drawn to the managed floating exchange rate system is the choice of an effective, and simple analysis of China's current exchange rate system and the operation of the advantages and disadvantages Finally the current RMB exchange rate system based on the exchange rate system of long term prospects.Based on the above six main sections of the exposition, come to this conclusion, which is the seventh chapter : RMB exchange rate reform must adhere initiative, controllability and gradual principle with China's national conditions, a managed floating exchange rate system in China is effective. We have to improve the RMB exchange rate formation mechanism, and keep the RMB exchange rate at a reasonable and balanced level, the basic stability. Improving the exchange rate formation mechanism is the establishment of the socialist market economic system inherent requirement. RMB exchange rate will be more flexible, the ultimate goal of the reform is the formation of independent floating exchange rate system, but the road is long. With the actual situation in China and to discuss China to a managed float exchange rate system choice effectiveness. Finally, Point out some of our exchange rate system arrangements existing problems and give out some proposals about China's exchange rate system reform.