The Impact Of The Opening Of Capital Projects On The Independence Of China's Monetary Policy

With the development of the trend of globalization,financial openness has become an important choice for China to integrate into the world economy,and the trend of capital account opening is irreversible.After RMB current account convertibility was carried out in 1996,people expect to realize RMB capital account convertibility.Especially after joining the world trade organization(wto),our country speed up the process of opening financial market,capital account openness also increased year by year.In 2003 China formally proposed to gradually make the RMB convertible under capital accounts.In 2014,our country furtherly put forward "accelerate RMB capital account convertibility.In the long run,financial opening is an important driving force for China's economic development.The full liberalization of capital projects is the inevitable choice of China's financial system transformation and macro monetary policy reform.In addition,the trend of globalization makes the economic ties between countries more and more closely,the monetary policy on the operation of the financial environment had a tremendous impact,so that the central banks face a serious challenge.Therefore,with the gradual opening of China's capital subjects,the economic ties with China and the world are getting closer and closer,the trade volume is gradually increasing,and the scale of international capital flows has risen sharply.The global economic cycle has emerged convergence phenomenon,the global macroeconomic policy coordinated development trend is more and more obvious.Therefore,the full liberalization of China's capital account will weaken the independence of monetary policy,and we should fully prepare,study and actively respond to it.Based on the current reality and trend of China 's economic and financial development,this paper analyzes and demonstrates the ternary situation of capital account opening,monetary policy independence and exchange rate stability in the basic theory of Impossible trinity.We mainly tries to solve several problems:firstly,whether there are ternary plight in our country,and the possibility and practical operation of the The Impossible Trinity in China.Secondly,through the measurement of economic model,The Impossible Trinity is used to study the quantitative analysis of the independence of China's monetary policy.Thirdly,the impact of China's monetary policy factors.Through the demonstration and inspection,we draw the following conclusions.First,China is really facing the ternary problem,that is,there is a linear relationship between the capital account liberalisation,monetary policy independence and fixed exchange rate.Secondly,the role of the exchange rate stability,capital account liberalisation and the independence of monetary policy are significantly different.On the one hand,the increase in capital account opening and the expansion of exchange rate flexibility will weaken the independence of China's monetary policy.On the other hand,the change in the independence of monetary policy has no obvious effect on exchange rate stability and capital account opening.Thirdly,in the long run,the opening of capital subjects will lead to a decline in the independence of monetary policy.We find that,in the long run,the improvement of capital account opening will reduce the independence of monetary policy.the increase in capital account opening for each 1%,China's monetary policy independence decreased by 1.98%.Fourthly,changes in exchange rate stability have a significant impact on the independence of monetary policy.We find that the stability of the exchange rate will have a greater impact on the independence of monetary policy.Exchange rate stability for each change of 1%,China's monetary policy independence will change the direction of 4.36%.In summary,with the trend of financial globalization,the trend of capital account opening also is irreversible.The key is the important between our foreign financial opening time and the independence of China's monetary policy.In the case of Monetary Policy Independence have a certain capacity and adaptability,we can increase the opening of capital subjects.Otherwise,if we are still very important in the independence of monetary policy,we must appropriately slow down the opening of capital subjects.China's policy choice in the practical application of ternary paradox will be an important reference for China's future financial policy and financial reform.