An Analysis Of The Choice Of RMB Exchange Rate Regime In An Open Economy

As our economy opens deeper to the outside world, how to improve the exchange rate regime so as to alleviate the negative impact from outside on economic stability has become an urgent problem theoretically and practically. This thesis first argues that open economy is vulnerable to outside impact and thus, in order to achieve equilibrium, it's important to choose the proper exchange rate system. Then, after introducing various theories of exchange rate, this thesis analyzes the previous RMB exchange rate systems in terms of their advantages and disadvantages. Meanwhile, on the basis of the empirical study of reforms of exchange rate systems in other countries, it is pointed out that with the macro economy changing, it is impossible for exchange rate system to remain the same. Furthermore, the present author suggests that, with a basket of currencies as the transitional tactic and crawling band to USD as the medium-term choice, we can truly realize managed floating exchange rate system, that is, the intermediate exchange rate system managing"crawling target zone"and"supervision target zone", and the ultimate goal should be the establishment of the free floating RMB exchange rate through widening the floating band gradually. In the short term, we should deepen the reforms of the supporting measures of the formation mechanism of RMB exchange rate.