Empirical Research On The Impact Of The Signaling Foreign Exchange Intervention On The Exchange Rate

The exchange rate change is influenced by the international balance of payments, inflation rate, fiscal policy, monetary policy and the expectation of exchange rate, and the impact of the signaling foreign exchange intervention on the RMB exchange rate has been a problem which is worthy to study. By influencing the expectation of market participants for the change trend of exchange rate, the central bank can achieve the goal of foreign exchange intervention. This paper use the existing international research results which are involving the impact of the signaling foreign exchange intervention on the exchange rate for reference, adopt the foreign exchange intervention date of different times since1994to measure and analyze micro and macro performance of the central bank’s sterilized intervention, take indirect factors into consideration to build a short-term exchange rate determination model, and build a VAR model to study the dynamic relationship between the foreign exchange intervention and the economic variables empirically based on this. By solving Nash equilibrium solutions of static game model with complete information and dynamic game model with incomplete information, we obtained the conclusion that the foreign exchange intervention has shocks on the RMB exchange rate by signaling channel. Purchasing foreign exchange will cause the exchange rate rises in the short term, but market participants owning rational expectations in the long term and will make this action invalid. Comparing with indirect factors such as money supply and domestic interest rate, the direct factor-central bank’s foreign exchange intervention makes larger contribution in maintaining the stability of the real exchange rate. Meanwhile, practice has proved that the foreign exchange intervention has caused the rise of opportunity cost, excessive concentration of exchange rate risk and has confliction with monetary policy, but it has a significant positive impact on maintaining our export competitiveness, promoting the RMB internationalization and reducing the exchange rate risk of micro-economic at the same time. Therefore, the central bank should adjust the target of foreign exchange intervention, make central bank’s intervention more diversify, improve the credibility of central bank’s intervention policy and established the exchange stabilization fund as soon as possible.