An Empirical Study On China’ S Exchange Market Pressure And Macro Economy

In the context of economic globalization, domestic and international economic relation, the pattern of capital flows, changes in financial market conditions and the internationalization of the RMB and many other questions will affect the healthy and stable development of China’s economy. Today, on one hand, double surplus exists in balance of payments for many years, and external dependence of economic growth is rising. The EMP continues to increase because of the surge in foreign exchange reserves. At the end of 2013, Chinese foreign exchange reserves reached 3,821.315 billion, located the first place in the world. On the other hand, under current exchange rate regime, the central bank was forced to put a lot of base money raising the price level, so the domestic inflation rate remains high. When economy suffers internal and external economic imbalance, more and more people begin to focus on the steady development of foreign exchange market and the money market. In a variety of complex situations, how to play a better role using macroeconomic policies, and optimize the environment for the development of domestic and foreign market is a challenge for Chinese economy. Therefore, from the theoretical and practical aspects, it’s important to systematically research EMP and related factors for the macroeconomic policy-making and the future of financial reform.Firstly, the paper describes this topic’s background and importance, summarizing the existing domestic and related theoretical studies and literature. The second part introduces the meaning and measurement model, and points out the internal and external reasons for the exchange market pressures combing the development of China’s economy. The external causes:the strong voice of RMB appreciation, trade friction and the environment of global economy; while internal reasons are:uneven economic development and rapid growth, huge foreign exchange reserves, the spreads in inflation rate. Then we analyze the adverse effects of EMP on the economy. The third chapter use Weymark general definition and structure equations of EMP to measure Chinese EMP index by TSLS model since the reform of exchange rate regime in 2005, and analyze deep-seated causes of changes in EMP. Then we use VAR model, impulse response functions to research the relationship of EMP, interest rate and economic growth, and analyze the affecting factors of EMP. The result shows that domestic interest rates and economic growth will have a positive impact on the exchange market pressure, and foreign interest rates will have a reverse effect. Finally, the article put forward some methods to alleviate pressure on foreign exchange market from three angles (macroeconomic, money market, foreign exchange market), in order to promote coordinated development of the foreign exchange and macroeconomic market.