Phenomenon Of RMB Appreciation And Inflation Exist

The reformation of the RMB exchange rate formation mechanism was implemented in July2005, in order to balance the international payments and reduce international pressure of revaluing its currency.The exchange rate against the dollar of RMB has already cumulatively appreciated by more than30percent in January2012. According to the theory of purchasing power parity, the value of money is a uniform both from its inside and outside external. The appreciation of RMB would reduce the upward pressure on domestic prices. While the RMB appreciates, the pressures of inflationary are in a sharp increase in domestic CPI, which is more thanS percent before the financial crisis, in2008, the highest point two-track price reformation in1994. With the dissipation of the financial crisis, the domestic prices start 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 called the conflicts of RMB inside and outside value, obviously departured from the traditional economic theory. The study the coexistence of domestic inflation and RMB appreciation has an important theoretical and practical significance, to the our country economic development.Co-existence of the phenomenon of the RMB appreciation and inflation, the reason can not simply split the analysis between the two independent existence, it should be both as a whole in the context of certain reasons investigate the coexistence of the two. This article believe that the RMB appreciation and inflation coexist phenomenon is the stage in the policy adjustment process in China to cope with the international 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 exchange rate system and a managed floating exchange rate system, China’s exchange rate and domestic inflation, the use of the Barcelona effect, the appreciation of the renminbi and the coexistence of inflation model, the use of cointegration test, measurement methods, the empirical analysis of the RMB appreciation and inflation coexistence phenomena.First, this paper analyzes the relationship of the RMB exchange rate and inflation under the fixed exchange rate system and a managed floating exchange rate system, and the appreciation of the RMB and inflation coexistence of phenomena to explain the stage to cope with the huge balance of payments surplus continuedphenomenon, and that domestic demand for money from growth to gradually stabilize the characteristics of the policy change and cope with the international balance of payments surplus is both co-exist. Secondly, the use of the basic principles of the Barcelona effect, the appreciation of the renminbi and the coexistence of inflation model, that the two coexist RMB real exchange rate of the reaction, while the reasons for the increase of the real exchange rate of RMB is China’s rapid economic development, The balance of payments surplus 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 policy recommendations: market-oriented reforms continue to improve the RMB exchange rate, robust capital flow between the inside and outside the market, the implementation of independent monetary policy.