Research On The Relationship Among The Interest Rate, Exchange Rate And CPI

The main problem of China’s current economic overall is inflation and RMBappreciation pressure.Inhibit excessive volatility and keep the currency prices stableare the main tasks of macroeconomic regulation now. Since the end of2010,China’scentral bank has raised legal ready to frequent rates,and has strived to the general levelof commodity prices steady.At the same time,China’s foreign exchange reservescontinued to grow,made the RMB appreciation unprecedented amplifier.In order tokeep the exchange rate steady,foreign exchange the gap had also increased,theinput-type inflation in China is arounding the macro-economic situation.While theinterest rates reflects the money market funds in the economic price,and also animportant indicator to show a national asset returns and financing cost.Exchange ratereflects the money market funds in foreign price,take influences on the import andexport commodity price too;CPI is an important index that is the measure ofcommodity market price of a country in certain period of comprehensive,its high or lowgo directly affect the whole economic situation in stability and volatility.Therefore,interest rates,foreign exchange rates and CPI among the three existing a degree ofrelevance.This paper meant to measure the inflation or deflation--the important indexes forthe core CPI,interest rate and exchange rate around the CPI.Firstly,CPI relationshipwith the basis of the research,and then take interest rate and exchange rate therelationship as a link,and last make an relevance and linkage modle with three arestudied by an external variables influence of impact.In the introduction parts on therelationship between the two-two and three research literature the comb system,and putforward the framework and methods;Then in the first chapter is interest rate andexchange rate and the CPI,the correlation between the three do a thorough theoreticalanalysis;In the second chapter briefly analyzed the situation and characteristic aboutour country money market,exchange rate market and commodities market,for furthertheory analysis provides realistic background;Then the third part of this paper is to use empirical process of measurement model and statistical method with brieflyexplain,and for the fourth part of an empirical test with the lays theoretical foundationmeasurement process.In the empirical parts,taking monthly data from August2005to October2011asthe samples,according to linkage theory about interest rate and exchange rate,interestrate and the CPI,CPI interest rates and exchange rate, applying measurement analysismethod to do,empirical analysis in a cointegrating relationship between two to two, andthen with the introduction of exogenous variables-broad of money supply M2,to test therelationship amang foreign exchange rates and CPI obtained between and among thelinkage of the degree.The results of the study is the expand and enrichment of linkagetheory betwwen interest rate and exchange rate, which will also linkage analysis fromthe money market and the linkage of the foreign exchange market,money market,exchange rate into the market and the linkage of the commodities market.In the fifth part,with the empirical results of inspiration and under the guidance ofrelevance theory,make some measures to deal with the inflation and the appreciation ofthe renminbi pressure.Suggestions for our country to deal with future deflation orthrough the inflation problem,and provide path to make effective monetary policy orexchange rate policy.