Study Of The Rmb Exchange Rate Fluctuations And Inflation Rate

After the RMB exchange rate system had innovated, there were two big economic phenomena happened in China;Firstly,the RMB exchange rate kept going up in a small range;Secondly,the price level in China kept rising rapidly.This"double high"phenomenon acts against the economic rules which aroused all the scholars'general attention,and becomes one of most important subject for economists'studying. Does this phenomenon hint that the economic rules are inapplicability to chinese economy?Will it persist for a long term or just momently?What is the relationship between exchange rate and inflation rate behind this phenomenon?And how is the impact effect?This paper firstly summarizes the scholars'study productions before,including domestic and international.Then based on the Sticky-Price Monetary Approach Model which educed by Rudiger·Dornbusch in 1970s,we study the dynamic correlation between between the RMB exchange rate and inflation rate,especially the pass-through effection on CPI.We find out international mobility of capital is the vital factor that impacts the dynamic path of the exchange rate and inflation rate.After that,we do an in-depth econometric study ,according to establishing model,and a series of econometric analysis,such as Granger Causality Test , Cointegration Test,Error Correction Model.The results show that the exchange rate holds one-way Granger affection to the inflation rate, and from a long-term perspective, the two factors are significantly negatively cointegration-correlated. At the same time, the fluctuated components of the exchange rate and inflation rate have the two-way"spillover effect".In the end of this paper,we have the conclusion, in order to dealing with the inflation effectively,the government should carry out retrenchable demand policies ,positive supply policies , and relatively stable exchange rate systems in certain flexibility range ;On the other hand, strengthen supervision and control on inflation, perfect the construction of foreign exchange market, and reinforce the supervision on the flowing of international capital,prevent effectively the international capital gamble.Furthermore,we should keep improving our producion's international competition advantage,this is also one of the significantly factors to keep our CPI stable.