A Study On The Impact Of Exchange Rate Regime On Macro Economic Performance

In the era of “post financial crisis”, a slowdown in emerging markets and currency volatility, especially the weak recovery of emerging economics, will drag on global economic prosperity. With the booming of international trade and the increase of economic openness, Exchange rate system is an important part of a country’s financial system, which plays a vital role for effectiveness of macroeconomic regulation and control.Economic growth and inflation are two important indicators of macroeconomic performance. Theories through the ages, however, think that the choice of exchange rate system plays a pivotal role in the government macroeconomic regulation and control.Therefore, it is necessary for emerging economies, especially China, to arrange appropriate exchange rate system in order to deal with the great pressure of foreign exchange revenues and capital outflow on economic growth as well as stable currency.For this purposes, this paper mainly researches the effect of exchange rate system choice on macroeconomic performance, and then analyzes the problem of the RMB exchange rate system arrangement in our country.In order to systematically research the effect of exchange rate system choice on macroeconomic performance, this paper is based on the theoretical analysis and the reality, which provides some suggestions for the RMB exchange rate system arrangement in the emerging economies of the empirical conclusion for reference. This paper mainly researches from the following aspects: The first part mainly reviews the current economic background of the emerging economies, and then researches on literature review of the exchange rate system choice and inflation as well as economic growth research, respectively makes a theoretical and empirical comparison and analysis. In the second part, this paper clears the definition of related concepts and the research samples and samples 21 countries during 30 years(1979-2012) to research the economic characteristics and exchange rate system choice in detail, and analyzes the effect of exchange rate system choice on macroeconomic performance in the form of an empirical model. In the third part, Given that represents the exchange rate regime choice standard Mundell-Fleming model and policy collocation adjusting internal and external macroeconomic equilibrium theory of the highest achievements, this part emphatically deduces and explains the Mundell- Fleming’s classic model and combs the relatedtheory of credibility, explains and illustrates the impact of exchange rate system credibility on macroeconomic performance. The fourth part analyses emerging economics and real exchange rate regime’s impact on macroeconomic performance based on the form of an empirical model. The results appear inconsistent. The fifth part makes a summary on “consistency" and "duplicity" situation of exchange rate system choice, then sets the empirical indicators, and then builds the static and dynamic multiple panel data model to analyze the exchange rate system credibility for emerging economies, which has been verified by the theoretical analysis with the empirical results. In the six part, based on reviewing the history of the RMB exchange rate regime choice and China’s macroeconomic performance, the future trend of the RMB exchange rate system is discussed in this paper. The last paper sums up the whole research.Combined with the nominal and real exchange rate system arrangement of empirical research, this paper draws the following conclusions: in terms of emerging economies,the actual execution fixed exchange rate system has the best performance against inflation and economic growth; The official claimed that floating exchange rate regime disinflationary effect is the best, intermediate exchange rate regime for the promotion of economic growth effect is the strongest; exchange rate system credibility has very obvious positive effect on macro performance of emerging economies. This paper suggests that in the process of the float of the RMB, China should pay more attention to strengthen policy credibility as well as the stability of the exchange rate system arrangement and to accomplish consistent.There are two aspects of innovation in this paper. Firstly, from the perspective of the credibility, this paper discusses about the effect of currency exchange regime choice of emerging market economies on macroeconomic performance, which focuses on the impact of exchange rate system credibility on macro performance research. Secondly,this paper is different from previous research whose sample selection is based on the division of a single institution. According to the main list of authority and organization of emerging economies, this paper chooses at least five or more institutions or organizations approved by the state, as the research sample countries and timely updates on the samples. Of course, as a result of the limitation of time and ability, the empirical studies of exchange rate system credibility in this paper just follows up to 2009, which has a certain gap compared with 2016 in that the sample data is difficult to obtain. The empirical results will be more persuasive if the data can be further extended. Based on the empirical analysis. The model of this paper just analyzes the linear relationshipbetween the variables without considering the cross relationship between them, the empirical models can be further improved and optimized.