Changes In Foreign Exchange Mechanism Of The Influence Of Monetary Policy Independence In Our Country

With the continuous advance of economic globalization, economicinterdependence among countries is getting higher and higher, China’s reform andopening up has entered a new stage of historical development. China’s foreign tradehas been considerable development. China’s deepening trade and foreign at the sametime, China’s foreign exchange reserves has also been a massive increase in1994toChina since the unification of exchange rates, the annual based on the rate of increaseexponentially in2006, China has surpassed Japan to become the world’s foreignexchange reserves, most countries, as of the end of2011, China’s foreign exchangereserves, balance up to$3,181,100,000,000. Such a rapid increase in foreignexchange reserves, of course, enhances the country’s international liquidity, as well asthe ability to guard against and defuse financial risks. Foreign exchange reserves, butnot the more the better in recent years, the rapid expansion of China’s foreignexchange reserves has generated a lot of negative impact on China’s economicdevelopment. Among them, the problems arising from the increase of foreignexchange caused by the high foreign exchange reserves is a very important aspect ofthe many negative effects, this article is for this problem into a more detailed analysisand discussion.In China’s current exchange rate and fixed exchange settlement system, thePeople’s Bank of bears unlimited responsibility on the repurchase of foreign exchangefunds, so as the growth of foreign exchange reserves, the amount of foreign exchangewill continue to expand, thereby increasing the monetary base the amount of themoney supply, which led to the failure of monetary policy independence. Rapidgrowth of foreign exchange not only the constraints from the total effectiveness of thegovernment’s macro-control, and also weaken the effect of macro-control structure,increasing pressure of RMB appreciation, the People’s Bank to control monetarypolicy space is getting smaller and smaller. Therefore, the analysis of foreignexchange for China’s monetary policy independence is very important theoretical andpractical significance, and analysis to explore the corresponding solution is conducive to the objective approach to the growth of China’s foreign exchange reserves and toensure that our monetary policy independence and effectiveness of a way.In this paper consists of six parts. The first chapter is the introduction part of thepurpose and significance of the topics of the papers described in this section, theliterature review section, as well as the structure of the paper arrangements, researchmethods, as well as innovation and inadequacies. The second chapter is the foreignexchange and monetary policy transmission mechanism. In this chapter analyzes theforeign exchange-of base money-money supply-monetary policy chain knock-oneffects mechanism. The third chapter analyzes the emergence and the reasons forChina’s foreign exchange problems. China’s foreign exchange problems, including thefollowing two aspects: First, because of foreign exchange by foreign exchangereserves, then the impact of foreign exchange reserves factors also generate foreignexchange cause of the problem; Second, China’s foreign exchange managementsystem reform and foreign exchange growth is another motivation. The fourth chapterfrom the two levels of theoretical and empirical in-depth analysis of the impact ofChina’s foreign exchange changes on monetary policy. Application Eviews5.0software, do a Johansen co-integration test, can be drawn through this model, in theshort term, foreign exchange impact of changes in money supply most independentvariables. Chapter five shows the impact of foreign exchange for China’s monetarypolicy independence, the six proposed measures. Chapter six is the concluding part ofthis article. In this section, the front section of the paper are summarized andgeneralized, status, role and significance of the impact of foreign exchange on theindependence of monetary policy mechanism. It pointed out that the problems are stillin existence, so we should have deeply study and exploration of the meaning.In the paper, the author highlights the analysis of foreign exchange in thetheoretical and empirical analysis at two levels to the impact mechanism of monetarypolicy; this is rare in the previous paper. However, due to the limited level of theauthor’s, and data sources has limitations, leading to relevant data will be a little bias,theoretical research is subject to further excavation and in-depth.