Study On The Influence Of Foreign Exchange Affecting The Effectiveness Of Monetary Policy In China

Since reform and opening up, the trend of Chinese foreign exchange accumulation obviously, The excessive foreign exchange has become an important problem of our macro economy, and interferes with the effective implementation of the central bank’s monetary policy seriously. On late December 2013, foreign exchange had reached 28.63 trillion yuan high levels, what is more, the ratio of foreign exchange and the base currency climbed to 84.9%. The expansion of the base currency caused by foreign exchange had a significant impact on the stability of the monetary market and the effective implementation of monetary policy, at the same time brought sterilization pressure to the central bank. In this paper, In order to looking for reasonable and effective measures, I make deep research to the relation of foreign exchange,China’s money supply and the transmission mechanism of monetary policy at the back of monetary policy regulation and control mechanism reform, by building an analysis framework of China’s monetary policy effectiveness under the foreign exchange mode.There are six chapters in my paper. Firstly, It introduces the background of selected topic and significance, literature review at home and abroad and the research content of this paper, research methods and innovation and deficiency. The second chapter analyzes related content about the foreign exchange, mainly including the concept and types of foreign exchange, the history about foreign exchange issues, the current situation and the reasons. The third chapter analyzes the Influence of foreign exchange on the effectiveness of the monetary policy in our country. This chapter mainly analyzes the relationship between the money supply and the monetary policy, the transmission mechanism of monetary policy and practice development. At the same time, this paper focuses on the analysis of this chain effective mechanism: "foreign exchange- base money- money supply-monetary policy", paving the way for the empirical analysis. The fourth chapter mainly uses Eviews6.0 software model, further analyses our country foreign exchange fluctuation’s influence on the effectiveness of monetary policy from the empirical level. The fifth chapter, the writer puts forward the short-term and long-term solutions in view of the foreign exchange’s influence on the effectiveness of monetary policy in our country, in order to achieve the purpose of research. The sixth chapter is the conclusion of this article. In this part, the writer summarizes the previous chapter, analyses the status, function and meaning of studying the effective mechanism. At the same time, points out the existing problems and carries out the significance of in-depth study and explore.