Research On The Interaction Of Interest Rate, Exchange Rate And Inflation

Inflation is a problem that the market economy country cannot avoid, its causes and governance has also been a focus in the study of economics. Since our country establish the market economy system,we have successively experienced significant inflation six times. in the history of Germany, Brazil, Argentina and Russia, they were plagued by have the hyperinflation. Although these countries have different background and reasons for inflation, but they take the same method for tackling inflation-interest rate policy and exchange rate policy. Summarize past inflation governance experience, interest rate policy and exchange rate polic ies in different periods of governance has different effects, at the same time, the over-reliance on these policy also brought some sequelae on the economy.In this paper, we integrated use of economics, finance and monetary banking theory knowledge, with interest rates, exchange rates and inflation’s relationships as the breakthrough point. Analyzing the transmission channels among the interest rate, exchange rate, inflation, and analyzes the effect of interest rate policy and currency policy effect and its influence on the economy. At the end of the artic le puts forward suggestions for enhancing the effectiveness of interest rate policy and currency policy.In the first chapter of give us a literature review of the research about interest rates, exchange rates and inflation, and point out the purpose of this study. Theory in the second chapter analyzes the transmission channels between interest rate and inflation, the transmission channels between the exchange rate and inflation, and the interaction mechanism between interest rate and exchange rate, illustrates the path of using interest rate policy and currency policy governing inflation. The third chapter discusses the development of relevant market in China, and the coordination and conflict between china’s interest rate policy and currency policy. In the fourth chapter we using relevant data make a empirical analys is on the China’s interest rate policy and exchange rate policy for the governance effect of inflation. Artic le According to the above research results this artic le also make suggestions for enhanc ing the effectiveness of China’s interest rate policy and exchange-rate policy.The study found that the interest rate policy is significantly better than exchange rate policy on the inflation governance, and interest rate policy showed both positive and negative effect on inflation, this is consistent with the above theoretical overview. Due to the regulation of china’s currency, exchange rate policy is unable to play a role of easing inflation, the main goal of exchange rate policy is service economy development and ensure economic stability, regulating the market is a complementary goal. Also found that due to the interest rate and exchange rate market regulation, the linkage between them is limited. Therefore, at the end of the artic le the author put forward corresponding suggestions on how to improve the effectiveness of interest rate policy and exchange rate policy.