RMB Exchange Rate Target Zone System Based On Sticky-Price Exchange Rate Model

With China's entry of WTO, trade relationship between China and abroad is stronger and stronger and exchange rate plays an important role in national economy. After the exchange rate reform in 1994, in fact, RMB exchange rate is a pegged exchange rate. And this kind of pegged exchange rate is no longer suitable for RMB system. At the present time, we need a more flexible and fluctuant exchange rate system. The exchange rate target zone bas both the advantages of fixed exchange rate system and floating exchange rate system. It sands clear signals to the market, ensures people the exchange rate will keep steady, prevents gamble attacks, with so many advantages it maybe a good choice for RMB reforming.The paper is divided into four chapters. In the first part Pointing out the history of RMB exchange rate and discussing why should choose RMB exchange rate target zone as the future development in china. Then we review the history of the theory exchange rate target zone and sticky price. In the second part discussing theory frame of the exchange rate target zone, including the exchange rate target zone's theory and models ,and sticky price theory. In the third part compose a model, called sticky price exchange rate target zone model, the introduce how to solve the model. The fourth part is demonstration, we use power series to solve the model, and gain equilibrium exchange rate and float zone, above those advance the technical details for application of RMB exchange rate target zone.