Analysis Of The Exchange Rate Regime Choice And The Rmb Exchange Rate Regime

As China's presence in world markets has risen dramatically in recent years, focus on its exchange rate arrangement has absorbed more and more people's attention. Consequently, a number of studies have attempted to answer the question how China should adjust its exchange rate regime so as to better accommodate the economic condition. Especially on July 21st ,2005, after more than a decade of strictly pegging the renminbi to the U.S. dollar at an exchange rate of 8.28, the People's Bank of China(PBOC 2005a) announced a revaluation of the currency and a reform of the exchange rate regime, more scientists and economists have put their emphasis on this new exchange rate regime. Up till now, this new arrangement has worked in our country for more than ten months. Whether it gets along well with the economic situation? Whether the new exchange rate arrangement could help to promote the development of China? Are there some defects in the older exchange rate regime? This paper surveys all these questions based on the analysis of the theories of exchange rate regime choice.There are four parts in my paper. In the first chapter, I mainly analyze the evolution of the international exchange rate regime and its classification as well as the advantages and disadvantages of all these arrangements. Then I analyze the traditional exchange rate theories, including the Mundell-Fleming theory,the impossible trinity and the optimal currency area. In the second chapter, I survey the evolution of the exchange rate regime for renminbi as well as the characters for each period. I mainly discuss the features of the exchange rate arrangement from 1994 to July 21st, 2005, including how it helped to successfully pass the financial crisis in 1999 and how it hindered the further development of the economy in China. The third chapter is the most important part in my paper. In this part, I analyze the characters of the new renminbi regime executed on July 21st ,2005. Based on this analysis, I survey the influence of the new regime on the improvement of Chinese economy and the later measures needed to help promote the further work of this...