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The Study On The Cause Of The Coexistence Of RMB Appreciation Andinflation

Posted on:2013-01-07Degree:MasterType:Thesis
Country:ChinaCandidate:G L LiFull Text:PDF
GTID:2249330377953174Subject:Finance
Abstract/Summary:PDF Full Text Request
The reformation of the RMB exchange rate formation mechanism wasimplemented in July2005, in order to balance the international payments and reduceinternational pressure of revaluing its currency. The exchange rate against the dollarof RMB has already cumulatively appreciated by more than30percent in January2012. According to the theory of purchasing power parity, the value of money is auniform both from its inside and outside external. The appreciation of RMB wouldreduce the upward pressure on domestic prices. While the RMB appreciates, thepressures of inflationary are in a sharp increase in domestic CPI, which is more than8percent before the financial crisis, in2008, the highest point two-track pricereformation in1994. With the dissipation of the financial crisis, the domestic pricesstart the increase progress again, the CPI was in a relatively high6.5percent in June2011. The society both has internal inflation and external appreciation, which is calledthe conflicts of RMB inside and outside value, obviously departured from thetraditional economic theory. The study the coexistence of domestic inflation andRMB appreciation has an important theoretical and practical significance, to the ourcountry economic development.Co-existence of the phenomenon of the RMB appreciation and inflation, thereason can not simply split the analysis between the two independent existence, itshould be both as a whole in the context of certain reasons investigate the coexistenceof the two. This article believe that the RMB appreciation and inflation coexistphenomenon is the stage in the policy adjustment process in China to cope with theinternational balance of payments surplus, combined with China’s actual conditions,trying to make a more complete proof.In this paper, the classical theory of economics, analysis of the fixed exchangerate system and a managed floating exchange rate system, China’s exchange rate anddomestic inflation, the use of the Barcelona effect, the appreciation of the renminbiand the coexistence of inflation model, the use of cointegration test, measurementmethods, the empirical analysis of the RMB appreciation and inflation coexistencephenomena. First, this paper analyzes the relationship of the RMB exchange rate and inflationunder the fixed exchange rate system and a managed floating exchange rate system,and the appreciation of the RMB and inflation coexistence of phenomena to explainthe stage to cope with the huge balance of payments surplus continuedphenomenon,and that domestic demand for money from growth to gradually stabilize thecharacteristics of the policy change and cope with the international balance ofpayments surplus is both co-exist.Secondly, the use of the basic principles of the Barcelona effect, the appreciationof the renminbi and the coexistence of inflation model, that the two coexist RMB realexchange rate of the reaction, while the reasons for the increase of the real exchangerate of RMB is China’s rapid economic development, The balance of paymentssurplus has played an important role in this process.Finally, explain the reasons for appreciation and inflation coexist phenomenon,combined with the impossible trinity theory, the paper gives three policyrecommendations: market-oriented reforms continue to improve the RMB exchangerate, robust capital flow between the inside and outside the market, theimplementation of independent monetary policy.
Keywords/Search Tags:appreciation of the RMB, Inflation, Balance of payments surplus, B-S effects
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