Exchange Rate Regime And Anti-inflation Performance

Exchange rate regime is an important component of a country’s financial system,the choice of what kind of a country’s exchange rate regime is critical to theeffectiveness of macro-control. Inflation is an important indicator of the performanceof the macro-control effectiveness. However, the relationship between exchange rateregime and inflation in the theoretical study is still rather controversial. Althoughthere has been a lot of empirical research literature, but the existing research is mainlybased on developed economies and emerging economies, research on transitioneconomies less. In this paper, using transition economies as research subjects,exploring the relationship between exchange rate regime and inflation performance,and further analysis of China’s economic transformation process of RMB exchangerate regime arrangements.The main work of this paper is to analyze the impact of exchange rate regimechoice on inflation，when transition economies in transition period. In order to explorethis problem, in this paper, standard analysis combining with empirical analysis,qualitative analysis and quantitative analysis was used. From the text, the article canbe divided into five chapters, three parts, as follows. The first part is the theoreticalpart of the full text, including the Chapter1and3. Chapter1is mainly on the existingliterature of the sort, compare and analyze, and found that on the relationship betweeninflation and the exchange rate regime choice theorists study there is a bigdifference.Chapter3is the theoretical basis of the full text, contains three main parts:the first detailed analysis of the existing system of inflation factors, followed byanalysis of the exchange rate regime choice theory-the nominal exchange rate anchortheory, and finally from the "impossible triangle theory" perspective on therelationship between the two was discussed by the line. After combing theories foundinflation factor is a very complex system, and this system is evolving, exchange rate regime is the development of this system and supplement;―nominal exchange rateanchor theory‖"nominal anchor exchange rate theory" for anti-inflationary is animportant Exchange rate regime selection criteria;"Impossible Triangle Theory" foranalyzing Exchange rate regime and inflation build a bridge. The second part is theempirical part, including Chapter2and Chapter4. Chapter2is the preparation ofempirical research, mainly on the current situation when empirical sample ofcountries in transition period. Chapter4is the empirical study, the first to the first partof the theoretical model based on analysis of selected variables to build static anddynamic multi-panel model, then the data in Chapter2of the transition countries inthe regression analysis. The empirical results show that the static and dynamic panelmodels are anti-inflationary best performance of the fixed exchange rate regime,anti-inflation worst performance floating exchange rate regime, in particular: thestatic panel model, CPI growth rate than the fixed exchange rate regime of floatingexchange rate regime low of about10.3percentage points; dynamic panel model, thefixed exchange rate system CPI growth rate lower than that under a floating exchangerate system, about14.6percent. The third part return to China’s reality, in theeconomic and social transition period, it analysis the impact on domestic inflationwith exchange rate analysis of institutional change. Research shows that our previouspaper, the situation in Eastern Europe and the CIS countries have a similar exchangerate system management enhancements can also reduce the level of inflation.The main innovation of this paper and the need to improve: From the creativepoint of view, there are three main areas of innovation in this article. First, from theempirical research methods, in consideration of the many factors affecting inflation,analyzes the impact of exchange rate regime variables on inflation. In consideration ofvarious factors premise CPI constructed multivariate regression model panel,highlighting the impact of exchange rate regime focusing on the introduction of thevariable on the CPI. Effect of exchange rate on inflation in the system to consider anumber of factors premise of inflation，in our country is still relatively few. Second,the sample of paper selected innovative. Review of existing research on exchange rate regime choice and inflation，there are studies on developed countries, there are alsostudies on emerging economies, but based on the study of economies in transition isstill few. Panel Data in Eastern Europe and the CIS countries article25selectedsamples and the timing longer able to reflect this part of the country during thetransition of basic economic characteristics of the transition. Finally exchange rateregime classification innovative, in this paper, the exchange rate regime classificationmethod selected facts RR exchange rate regime classification, direct application ofRR exchange rate regime classification study of domestic literature less, usingReinhart and Rogoff’s exchange rate regime quintiles exchange rate regimeclassification standard to make more scientific and detailed. Of course, there is still alot of work need to be perfected, such as: Since it is difficult to obtain a sample ofdata, empirical study is the follow-up to2010, as further expansion of the data will bemore persuasive empirical results; Based on empirical analysis of convenience, thismodel only analyzes linear relationships between variables without considering thecross-relationship between them.