Positive Test Of Interest Rate Parity Theory In China: 2006-2008

Interest-rate Parity Theory, also named Forward Exchange Theory, is the about the relationship among interest rate, spot exchange rate and forward exchange rate of two currencies. From the angle of the funds fluxion, Interest rate Parity Theory describes the relationship between interest rates and exchange rates, and often is applied to other exchange rate theory in the analysis. as a fundamental tool Western scholars have verified the practicality of the theory., but the interest rate parity theory which set up in different countries come to different conclusions. Many scholars in China conducted research to the usefulness of the theory and put forward policy recommendations. Such as Jiang Bork, Zhao Hua, Wang Aijian, and other famous scholars , from different angles on the relationship between interest rates and exchange rates, select data of different periods to tested the theory. in China.This paper first explains the concepts, and then gives a detailed account of interest rate parity theory of the different stages On the base of the outcome of the study, this paper selects data from October 2006 to March 2008, and uses Regression Analysis to research into the application of Interest-rate Parity Theory It selects the rate of the RMB against the U.S. dollar, euro and pound on the spot and one-month forward rate and the three-month forward rate, as well as the one-month and three-month LIBOR rate and the RMB SHIOR interest rates, has descriptive analysis of the forward market And this paper concludes that in our country which has the implementation of exchange controls, the interest rate parity theory is difficult to achieve good conclusions.Combining theoretical research results of the analysis of the scholars, it finds reasons that conclude to achieve the theoretical reasons difficultly. Because the central bank stabilizes the RMB exchange rate for the policy objectives, leading to the lack of flexibility of the foreign exchange supply and demand. The rate is limited to few volatility, the RMB exchange rate can not be fully realized in an instant to the appreciation of the RMB exchange rate formation of the market will be the expected devaluation. Finally, in the above analysis, based on the improvement of China's financial markets, and enhance the effectiveness of the market, the interest rate of China's exchange rate policy coordination, and other aspects of a number of recommendations, such as gradually push forward capital account liberalization; steadily promote market-oriented interest rate process; relaxation of the RMB exchange rate Fluctuations of increasing the foreign exchange market depth, breadth and openness. And with the deepening reform of the financial system of China's foreign exchange controls, the theory in China will greatly enhance the relevance, will become a good tool. of a long-term RMB exchange rate pricing and foreign exchange markets forecast...