The Influence Mechanism Among Foreign Exchange Reserves?U.S. Interest Rate And RMB Exchange Rate—Theoretical And Empirical Study

For the whole time,RMB Exchange Rate is a hot issue of both academic world and practice fields,especially from the exchange rate system reform of July 2005,RMB Exchange Rate System gets further improvement,implementing a market-based, with reference to "a basket of currencies" in a managed and floating exchange rate system.And then RMB achieves the freely convertible of the current items,more and more scholars begins to in-depth investigate the factors affecting the RMB exchange rate.After the ERSR of July 2005,RMB exchange rate(RMB against the dollar as the representative) has been a persistent unilateral appreciation for several years,and the amount of foreign exchange reserves also broke the $ 3 trillion at the end of 2012.However,RMB against the US dollar fluctuated from 2012,even appeared the case of several months devaluation in the second half of 2015,in which period the trend of RMB against the US dollar had changed significantly compared to the previous years.In the same time,China's foreign trade favorable balance gradually narrows and the amount of foreign exchange reserves began to reduce.On the other side,The pace of RMB internationalization is picking up gradually and includes in the IMF Special Drawing Rights SDR basket of currencies in 2015.Thus, RMB is easier to affected by international market than ever,and is easier to affected by the monetary policy of the world's reserve currency,namely the dollar too.During the same period,in the context of the US economic recovery and the Federal Reserve's interest rate policy,commodity prices began to significantly decreased,other major currencies against the dollar,such as Euro-dollar exchange rate and the yen-dollar exchange rate,also began a clear trend of depreciation in the past two years,which implies that the US economic policy has a growing impact on the other economies.Under the above background, studying the influence mechanism among Foreign exchange reserves?U.S. interest rate and RMB exchange rate is particularly important.Under the background of the change of the trend of RMB exchange rate?the gradually narrowing of the amount of foreign exchange reserves?the speeding up of the process of RMB internationalization and Fed's economic recovery,discussing the questions that whether is there a relationship between the recent volatility of RMB exchange rate and the US interest rate policy?what's the influence mechanism of the amount of foreign exchange reserves and RMB exchange rate and what's the influence route among RMB exchange rate?foreign exchange reserves and the US interest rate is significant to analysis the domestic and international macroeconomic environment.This article selects a total set of 48 monthly data from January 2012 to December 2015,based on the theory influence mechanism among RMB exchange rate?foreign exchange reserves and the US interest rate to construct the VAR model and the VECM model respectively so as to test the short-term and long-term influence mechanism among the three variables.What's more,this paper puts forward the corresponding policy recommendations based on the test conclusions.The test conclusions are as follows.Firstly,the influence path from RMB against dollar exchange rate to the amount of foreign exchange reserves exists,but the other way round do not exist.In terms of the absolute amount of view or from the amount of change,RMB against dollar exchange rate will influence the amount of foreign exchange reserves,but the foreign exchange reserves won't influence RMB against dollar exchange rate.And then,because of the change of the amount of foreign exchange reserves,there is a exchange rate overshooting of RMB against dollar exchange rate in the short-term and the depreciation of RMB against dollar exchange rate will result in the increase of the amount of foreign exchange reserves in the long-term.In other words,the increase of the amount of foreign exchange reserves will be synchronized with the depreciation of RMB against dollar in the long run.Last,RMB against the US dollar will not be affected by the US interest rates,but in turn RMB against the US dollar could affect the US interest rate.