Impact Of Federal Reserve Board Exit Quantitative Easing Monetary Policy On The RMB Exchange Rate

2008outbreak of the financial crisis in the United States at the beginning,before the market due to excessive credit creation, resulting in a credit riskincalculable, eventually led to the US capital market bubble burst quickly. In order tosave the crumbling US economy, the Federal Reserve Board began (the Fed) to takea simple attempt to lower market interest rates policy of liquidity risk, but it will notimprove market liquidity in the short term, but to use the more intenseunconventional monetary policy supplement market liquidity. Led by former USFederal Reserve Chairman Ben Bernanke launched quantitative easing monetarypolicy to resolve the status of existing US market liquidity declined significantly, andit is in this context, the United States launched another round of QE. However, theimplementation of QE created by the massive amounts of liquidity can onlytemporarily ease the US financial crisis, unable to rescue the ensuing global financialcrisis fundamentally.American financial crisis makes the sudden collapse of the internationalfinancial system, in the current context of global economic integration profound, asthe world’s second largest economy, China can not avoid the US financial crisis onChina’s financial system, the shock of impact and shock. Base currency and creditcurrency forex exchange dollar as countries, both national currency is the currency,then the Fed’s quantitative easing monetary policy, both domestic as well as theformulation of monetary policy for the international financial system.After the implementation of the four rounds of quantitative easing monetarypolicy, the US economy is getting warmer, the unemployment rate continues to decline, and ultimately the Federal Reserve in December2013announced a regulargradually withdraw quantitative easing monetary policy, large hot money began tore-return to the US financial market, the bulk commodity prices continued to fall, thedollar return to strong currency, the US dollar to other major currencies against therising of the emerging capital markets influence and impact is particularly evident.With the Fed’s quantitative easing monetary policy exit, after the United States as theworld’s second largest economy, China’s economy will undergo multiple tests.We should also see that in the current global economic integration and financialglobalization, as well as credit currency dollar-dominated international monetarysystem, the US dollar is the currency both local currency (the dollar is to issue by theUS government, but70percent of the dollar flow use abroad), US monetary policyboth domestic monetary policy, monetary policy in the international market. With theUS economic recovery, the unemployment rate continues to decline, the Fed finallyannounced in December2013a regular gradually withdraw quantitative easingmonetary policy, large hot money began to re-return to the US financial markets,commodity prices continue to decline, the dollar return to strong currency, the USdollar against other major currencies rising capital markets for emerging countriesaffected and the impact is particularly evident. So, whether it is the US launch of QE,QE exit or the United States, will be a huge impact and the impact on the US andglobal economy and markets.With the Fed’s quantitative easing monetary policy exit, after the United Statesas the world’s second largest economy, China’s economy will inevitably suffer shock.Every exit loose monetary policy to quantify, almost all accompanied by thedevaluation of the RMB against the US dollar. As an important factor affecting theinternational balance of payments in macro, exchange rate volatility for the healthydevelopment of China’s economy is undoubtedly negative.To explore how the Fed QE exit the RMB exchange rate movements, this paper reviewed the relevant literature on monetary policy to quantify wide exit mechanism.It was found that the analysis of foreign scholars focus on QE exit of internationalcommodity prices and the impact on US national employment, income andconsumption levels for domestic scholars focus more QE exit after analysis ofmacroeconomic trends. However, after exiting the quantitative easing monetarypolicy, the impact of currency exchange rates in emerging market countries has notbeen carried out in-depth research, mostly focused on the theoretical level, the lackof further measurement test.In this paper, methods of measurement method based events, summary sinceJanuary2013to October2014, the Federal Reserve released the point of each roundof debt reduction in the size of the minutes of the purchase, according to a point intime before and after each week (a total of15days of event window period) changesin the US dollar against the RMB exchange rate for event examination, based on theresults of an empirical analysis of the test data model, draw more convincingconclusions, to make up for the shortcomings of the lack of relevant researcheconometric model, while targeted Research Fed exit quantitative easing monetarypolicy of RMB exchange rate fluctuations, the deep-seated causes.From a practical sense, building the RMB against the US dollar trend analysismodel based on the event, more conducive to study how to deal with the financialrisks of the RMB against foreign currency fluctuations. Meanwhile, in order to studythis more targeted approach to explore the quantitative impact of exit loose monetarypolicy in other areas of China’s capital market, the advance guard against thepotential risks that may be generated by China’s macroeconomic performance.Under the law based on the discovery of the event, with STATA softwaremetering window period of change in the RMB exchange rate significantly after theFed’s quantitative easing part exit announcement on RMB exchange rate is notobvious. After analysis, the RMB exchange rate is not subject to reason QE exit announcement effect to the following points: First, China’s capital account is not yetfully open; two, the huge foreign exchange reserves to hedge the risk of fluctuationsin exchange rates; three, endogenous growth macroeconomic there is still a strongforce for cross-border capital attraction.Finally, this paper analyzes how the country should be quantified in thebackground under the easing withdrawal, seize opportunities, meet challenges andtake appropriate macroeconomic policies supporting the reasonable marketoperations to avoid the unknown risks.