| Along with the rapid globalization of economy and finance, the integration of world economy is obvious day by dy. The global financial crisis, which is caused by the US subprime crisis in 2007, indicates that countries become more closely related, especially in economic field. Exchange rate is such a key variable in macro economy that its fluctuations have great influence on resource allocation.Governments choose matching rate regime and policies in accordance with their economic development and domestic economy movement condition, respectively. On July 21st 2005, the People's Bank of China(PBOC) announced its adoption of a managed floating exchange rate regime based on market condition with reference to a basket of currencies, and the USD was on longer the only foreign currency to which RMB pegged. After the reform of the mechanism for setting the RMB exchange rate, RMB continues to appreciate. The appreciation of RMB against USD had been up to 20% from Jul.21st 2005 to Dec.31st 2009. Although RMB has a significant appreciation, there are still more upward pressures. Since the financial crisis, America and Japan bring up the exchange rate issue again and clamp down on China; Some countries adopt anti-dumping measures to China, targeting RMB exchange rate.Exchange rate determination theories are one of the cores of the international financial theory, which study about which factors determine and affect the exchange rate, This paper choose to modify Dornbusch model according to the actual conditions in China on the base of the introduction and contrast of Western exchange rate determination theories. This paper constructs a new RMB exchange rate determination correction model, and does an empirical analysis using quarter data from 1994 to 2009. At the end of the paper, the author give some advices on the reform ofthe RMB rate forming mechanism. The main framework of this paper includes four parts:The first part is the theoretical basis of this paper, which introduced exchange rate determination theories after the collapse of the gold standard. These theories are divided into two categories:early exchange rate determination theory and modern exchange rate theory. The former includes PPP, IRPT and traditional flow analysis.The second part first gives an outline of domestic literatures on RMB exchange rate determination theory. Though the analysis, this paper modifies Dornbusch model according to China'economic condition. Then under the premises, exchange rate determination correction model is built, which includes commodity market, currency market and international asset market. This paper analyzes the correction model though graphs, and derives the exchange rate determination correction equation.The third part doer an empirical analysis on the correction equation derived in the above part. The variables concerned include the mean value of RMB exchange rate, money supply, GDP, federal fund rate, China's customs revenue, value of imports and capital control degree, which is obtained through Kalman filtering method. Selected seasonally data are from 1994 to 2009.The last part mainly give policy advices according to the above conclusions. With the integration of world economy, China has gradually reduce customs tax, and even abolish some kinds. Now tariffs have weak impact on the exchange rate of RMB. The Chinese Government are relaxing capital controls. Capitals can freely transfer. In order to maintain a stable exchange rate and to reflect China's real economic conditions, China should accelerate economic restructuring, and transform the mode of economic development; China should speed up the process of interest rate liberalization. so the interest rate can truly represent the equilibrium of the money market; improve the foreign exchange market maker system, and continue to promote the reform of the exchange rate forming mechanism; relax capital controls step by step. |
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