The Study On The Impacts Of Macroeconomic News And Monetary Policy Surprise On The RMB Exchange Rate

Since July 2005, the RMB exchange rate formation mechanism reform has experienced 10 years. During this period, to promote the level of marketization of RMB exchange rate, the central bank has relaxed the volatility of exchange rate, introduced market-making system, and gradually exited the daily intervention and so on.The exchange rate flexibility is growing.In such a situation, participants of the foreign exchange market will pay more attention to the impacts of macroeconomic news and monetary policy surprise on the RMB exchange rate. For example, whether the news will change market participants’investment behavior, ultimately affect the exchange rate by changing their expectations of the exchange rate as the classic models of exchange rate determination? Based on the thinking of these problems, in this paper, we analyze the classic determination models of the exchange rate, and find out some relevant theories to research the status quo of the foreign exchange market. Then, analyze and test the theories, which includes the news model of exchange rate determination and the microstructure theory of foreign exchange market.Firstly, we present the development of the news model based on the news model of exchange rate determination and the microstructure theory of foreign exchange market. Then, we judge which information of macroeconomic fundamentals and monetary policy operations may impact participants’expectations of the exchange rate. Secondly, we study the influence of the fundamental news on RMB exchange rate through parametric test which includes multiple regression model and EGARCH. Again, we classify the fundamental news by the event study method, test them by nonparametric test which includes sign test and paired sample t test, and analyze the different types of events’effects on exchange rate. Finally, through theoretical analysis and empirical test, by comparison with the results of parameter test and nonparametric test, we argue that only part of the fundamental news can affect the exchange rate by affecting the expectations of the foreign exchange rate market participants, which means the traditional exchange rate determination theory is applicable to China. However, we also find out that the influence has hysteresis quality, and different types of news has different effects.