The Empirical Research Of Effectiveness Of Our Central Bank's Foreign Intervention

In recent years, with economy's rapid development, there is a lot surplus in international settlement of China and the exchange rate of Renminbi faces continual upper pressure. In order to maintain stabilization of exchange rate of Renminbi and promote a health and orderly development of macro-economy, the People's Bank of China put in place intervene and sterilized operation in foreign exchange market, which leads continual and rapid growth and excess liquidity. So how to put in place effective sterilized intervene operation in order to ensure the more development in China economy, has become an important topic in the central bank of China.The paper first gives a simple introduction of basic theory of effectiveness of the central bank's foreign exchange intervention, which includes definition, classification, purpose, way and transmission channel, and define the measure criterion(direction criterion, smoothing criterion and profit criterion) of effectiveness. Then, according to different sterilized intervention be adobted, it analyzes and summarizes the central bank's intervention practice in past years which can be divided into four periods, and points out its effectiveness and ncfmxy. And then, according to actual situation of China, it prefers to Kim(2003) and Guimaraes(2004)'s vector auto regression model(VAR), gives an empirical analyses of effectiveness of the central bank's sterilized intervention which uses autocorrelation test, ADF test, co-integration test, Granger causality test and analyses of impulse response, and comes to conclusion that intervention is effective. In other words, sterilized intervention can have an influence on exchange rate's change, but is influenced by economic variables such as interest rate and inflation rate which reduce its effectiveness. At last, based on the foreign successful experience and lessons of failure, the paper gives some feasible policy recommendations in light of the analyze of intervention practice and conclusion of empirical test mentioned above, which concludes that combine variety policy, establish multipole foreign exchange reserve system, improve market system and decrease direct intervention frequency and so on.