Factors Affecting The Exchange Rate System And The Empirical Analysis Of China's Exchange Rate System

Our country is in the key period of the reform of the exchange rate system. The purpose of this paper is to explore the rules of the implementation, existence and abolition of exchange rate policy and the important factors that affect the flexibility of the RMB exchange rate system, in order to put forward some suggestions on exchange rate system reform of China.This paper is divided into three parts. The first part is a brief introduction about the basic concept of the classification of exchange rate system and the summary of the research on the exchange rate issue. In the second part, several representative countries are chosen, to analyze the exchange rate system and foreign exchange policy and their evolution. The purpose is to explore some of the regularity of things, and reveal what important factors affect their choice, to get some inspiration for exchange rate system reform and exchange rate policy choice of China. In the third part, refer to the experience and lessons of the representative countries' exchange rate system and policy choice, on the basis of the brief introduction of the evolution history of China's exchange rate regime, an empirical analysis carried out on the important factors influencing the choice of exchange rate system of China.By means of the analysis of the exchange rate system and foreign exchange policy of the representative countries, this paper argues that the main considerations behind the implementation of an exchange rate policy are two factors. The first is the reasons for the implementation of the new policy, that is, what will be got and what will be paid in the new policy. This is the motive of the implementation of the new exchange rate policy. The second is whether the country has a political and economic foundation for the implementation of the new policy. This is the key to the smooth implementation of the new exchange rate policy.In this paper, the time series VAR model is constructed, and the data of 1985-2015 is selected. On the choice of model variables, this paper refers to the factors that influence the exchange rate policy of the representative countries, and combined with the reality of our country. The size of the economy, the level of economic development, international reserve level, trade shock fragility, exchange rate risk positions, financial deepening, such 6 factors are selected.The results of this paper show that all these 6 factors will affect the flexibility of exchange rate system, and the impact of some factors on the flexibility of the RMB exchange rate system is different from the western mainstream research results. The flexibility of RMB exchange rate regime is positively correlated with the level of foreign exchange reserves. The flexibility of RMB exchange rate regime is negatively related to the vulnerability of trade shocks. The change between the flexibility of RMB exchange rate regime and the level of economic development is positively related in the short term, but in the long-term this relationship disappears. In the short term, the degree of flexibility of RMB exchange rate system has a negative correlation with the degree of financial deepening degree, but the relationship will become positive in the long run. In the short term, the flexibility of RMB exchange rate regime and the balance of external debt has a negative correlation, which has become a positive correlation in the long term. In the short term, the change of exchange rate regime and economic scale has a very small negative correlation.The innovation of this paper lies in, it studies the law of the implementation, the survival and the abolition of the exchange rate policy of the representative countries, as well as the factors that affect the exchange rate policy, analysis is carried on from these two points "Why we are willing to carry out" and "why can we smoothly implement", and explain why the policy will eventually be abolished from the perspective of cost and benefit.