Research Of The Information Content Of Time Structure Of Interest Rates About Future RMB Exchange Rate

The ability of the term structure of interest rate to predict the future changing of macro economic variables has been the focus of attention by scholars and market participants. But such research is confined to the domestic macro economic variables, such as economic growth, inflation, interest rates, is not available to international financial field.This paper studies some exploration, about the term structure of interest rates' predictive value of exchange rate changes. With the advancement of China's interest rate marketization level, and RMB internationalization, it's more important to study the relationship between the term structure of interest rate and exchange rate of RMB. Firstly, because of term structure of interest rates has information content about future economic growth and inflation, according to the exchange theory,it has predictive value to the future exchange rate.Then, This paper considering of information content of the term structure of interest rate about future inflation changing and the sticky prices monetarism model, analysis the forward rate has the ability to forecast future exchange rate. Using the co-intergration method, we empirically test the ability of the forward rates, calculated from Shanghai exchange yield curve and LIBOR, to forecast the future changes of RMB exchange rate.The results shows that, between the forecast horizon of 1 to the 12 months,the forward rate of China and foreign have the co-integration relationship with the future change of RMB exchange rates. And the forward rate in China has the positive relationship with the value of RMB, contrary to our analysis. From the side to confirm that the term structure of interest rates in China has no information content to predict the future inflation.Finally, through empirically test we find that the term structure of interest rates of our country has no ability to forecast the future inflation changing, which constrains the ability of the term structure of interest rates to forecast future RMB exchange rate changing. It can conclude that the term structure of interest rate having information content about future RMB exchange rate,but the internal information transmission factor is more complex, needing further study.