The Rmb Exchange Rate Regime Before The Opening Of The Capital And Decisions

Different from the devaluation expectation afler the Asian financial crisis, Chinese RMB exchange rate keep stable as before, which is disaccord with the announced anaged floating policy. There are many discussions about the RMB exchange rate regime and whether the RMB is overvalued. Agreement can't be reached at present. The purpose of this paper is to study the two issues before the liberalization of the capital and financial account in balance of payments. This paper consists of three chapters. Chapter one begins with a classification of the exchange rate regime. Then the RMB exchange rate policy is reviewed. Instead of real managed floating, the present RMB exchange rate is dollar-egged in fact, which is supported by two kinds of controls: One is the controls on entry to the foreign exchange market; the other is the heavy intervention of the Chinese government in the foreign exchange market. China maintains strict control over the capital and financial account at present, but the liberalization of it will be realized sooner or later. During the transition period before the liberalization of the capital and financial account, to adapt to the requirement of further opening-up gradually, some reform suggestions about RMB exchange rate regime are given at the end of this chapter. In chapter two, how the exchange rate is decided in transition period is examined. At first, the methods used in the study of this topic and several popular models, such as PPP, CIP, etc, are analyzed. Then they are used in the explanation of the RMB exchange rate. In this chapter, several innovations are made about the usage of the present models, and some phenomena are explained in new ways. Chapter three focus on the issue of equilibrium exchange rate. Many macroeconomic variables are influenced by the fluctuation of exchange rate. So exchange rate policy is very important to the equilibrium of the economy. After some misunderstandings about basic concepts are clarified, the equilibrium exchange rate is illustrated through both qualitative methods and quantitative methods.