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Rmb Exchange Rate System And The Effectiveness Of Monetary Policy Analysis

Posted on:2006-05-15Degree:MasterType:Thesis
Country:ChinaCandidate:X Q WuFull Text:PDF
GTID:2206360152985717Subject:Finance
Abstract/Summary:PDF Full Text Request
Exchange rate regime, as a part of financial system,is not onlyconcerned with the financial policy but also concerned with financial riskof a nation. It is very imperative to choose proper exchange rate regimefor the development of macro-economy. Monetary policy, as an importanteconomy policy, is a tool to control macro-economy. In the condition ofopen-economy, deeper economy connection among nations has a complexinfluence on monetary policy making and operating. So it is essential toconsider exchange rate regime when studying effectiveness of thefinancial policy because of economy globalization trendy. Outline and logic structure There are three main problems in the thesis. (1) Is the monetarypolicy effective considering the present exchange rate? (2) Whatinfluence does the present exchange rate on the effectiveness of monetarypolicy and how? (3) How to improve the effectiveness of monetary policyby exchange rate reform? So in the thesis, firstly, the author introduces the conception of theeffectiveness of monetary policy, which has the same meaning withmonetary neutrality. Secondly, the author introduces M-F model, which isa classical model to study the effectiveness of the monetary policy inopen economy. And then analyzes the effectiveness of monetary policywith the modified model in China. Thirdly, the empirical test is discussed,including Granger causality test between M2 and GDP and empirical teston effectiveness of monetary policy. Lastly, exchange rate reform isdiscussed in order to improve the effectiveness of monetary policy. The main content and viewpoint Chapter 1 introduces the conception of the effectiveness of monetarypolicy firstly. The effectiveness of monetary policy has the same meaningwith the monetary neutrality in quality. Then the author emphasizes thatmonetary neutrality in long-term can not deny monetary neutrality inshort-term, and that liquidity trap and investment without flexible interestrate elasticity cannot deny effectiveness of monetary policy. Chapter 2 discusses the revision of the M-F model in China andapplication of the modified model. The curve of controlled interest ratesubstitutes Curve BP due to strict control on interest and capital. CurveBP should be bent due to asymmetric control on capital. Then the authoranalyzes the effectiveness of monetary policy with the modified model.Thirdly, the author evaluates the modified model by analyzing control oninterest rate and capital. Based on the above mentioned, a conclusion isdrawn that monetary policy is effective, but the effectiveness is weakerbecause of partial liquidity of capital and partial market mechanism ofinterest rate, and monetary policy is still effective considering sterilizedpolicy even for bent BP model. Chapter 3 is the empirical test on the effectiveness of monetarypolicy in China. Firstly, the Granger causality test is introduced. The testresult shows that the causality relation exists and the monetary policy iseffective. Secondly, the influence of the exchange rate regime onmonetary policy is analyzed by empirical test from three aspects. And theresult shows that the effectiveness is reduced in order to maintain stableexchange rate. Chapter 4 discusses exchange rate regime. In order to improve theeffectiveness of the monetary policy, it is a practical way to reformexchange rate regime. Firstly, the author introduces present exchange rateregime, it is the pegging of US dollar according to the standard of IMF.Secondly, the author introduces trillium and its application in China.China chooses stability of exchange rate and independence of monetarypolicy except liquidity of capital. Thirdly, the author analyzes themagnificence of the independence of monetary policy for China. Portly,the author discusses the reform of exchange rate. It is a practical way tochoose flexible exchange rate in order to improve the effectiveness ofmonetary policy. Compared with managed float regime, target zoneregime should be more proper for a middle term. The thesis is practical for the development of Chinese economy...
Keywords/Search Tags:Exchange rate regime, The effectiveness of monetary policy, M-F model, Trilemma
PDF Full Text Request
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