| Now China’s reform and opening up is continuing to deepen and the development of economic is accelerating. In this background, our country’s control in capital project is getting looser. The frequency of our country’s cross-border capital inflow is higher and higher and the scale of the cross-border capital inflow is getting bigger and bigger. It is an undeniable fact that continuous inflow of cross-border capital has promoted the development of our national economy to some extent. However, on the other hand, it inevitably brought huge influence on the effectiveness of China’s monetary policy. In recent years, China’s foreign exchange reserves has been increasing because the central bank has to maintain the stability of the RMB exchange rate faced with the continuous cross-border capital inflow, which results an increased money supply. This undoubtedly interferes with the monetary policy transmission channel, and ultimately affects the effectiveness of monetary policy.In this paper, we aim to study the influence of numerous cross-border money flows on the effectiveness of monetary policy under the background of relaxed capital project supervising and continuous development of RMB internationalization. First of all, the paper sums up the numerous senior scholars’ research results both in domestic and international. On this basis, we analyze the theory explaining the impact of cross-border capital flow on monetary policy effectiveness. This paper mainly discusses cross-border capital flow and its influence on the money supply through two aspects of monetary multiplier and base currency. Hereafter we analyze how cross-border capital flow influences the monetary policy effectiveness through the monetary policy transmission channel. Then we conduct an empirical analysis with econometric method. Finally, according to the theory and empirical analysis, we put forward the feasible policy suggestions combined with the actual situation in our country. |
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