Assesseing Exchange Rate Theory Of Modern Times

Exchange rate is defined as the price of a certain currency in exchanging unit of other currencies, and is indispensable tool for international trading, capital flows and any commercial activities between or among countries. It is wild known that Balance of International Payment, Exchange Rate and International Reserve are the basic and backbone of international Financial Theory. Therefore, how to decide the exchange rate is the most essential part of Foreign Exchange Rate Theory, and a hot topic for academic research during centuries. Pricing model is developing together with the economy globalization and the ongoing changes of international currency structure. It is a blossoming period for new hypothesis and frames with the commercialization of global market, which researchers explore any possibilities and assumptions from different aspects and points of view. Till now, there is still not a certain model that mature and perfect enough to be commonly recognized, though some classical theories and frames used to be popular.In the following study, classical and typical hypothesis in different periods will be stated in detail based on timeline. Besides the tracing the history of modern exchange rate theory, both beneficial outcomes and deficiencies will be analyzed as well based on the summary of existing results of previous academic researches and practical experiences. Some fresh ideas could be found in the further explanation, such as key factors of future exchange rate pricing decision, recognition of market characters, pricing model, data and methodology, and development estimation. It would not only be beneficial for the academic research theoretically, but also would contribute to the restructure of modern exchange rate frame. Foreign exchange market is an essential session of foreign exchange rate market restructure for China currently. It will impact on China foreign exchange rate market and the development of overall financial operation. As a young player, there is a significant gap between China and international exchange rate market. While it is still important and helpful to understand the set up history of exchange rate frame and clarify the future development target.