Empirical Reserach On The Impact Of Short-term International Capital Flows On RMB Exchange Rate

After the Economic crisis,short-term international capital flows frequently.The United States and other countries has implemented quantitative easing monetary policy in 2010,Chinese government implements monetary policy and expansionary fiscal policy,capital returns to China.In 2014,the United States announced its withdrawal from the QE policy,besides,the structural reform of supply-side in China,the economic growth rate by high speed steering in medium high speed,reduce of the benchmark interest rate,the devaluation of the RMB exchange rate is expected to continue to increase,in recent years a large number of short-term international capital outflows,how does short-term international capital flow affect the exchange rate of RMB is of great significance.This paper studies how short-term international capital flows affect the RMB exchange rate.The first part is the introduction,including the significance of the topic selection,the research status at home and abroad,the innovation and shortcomings,and the scope of the research.The second part is the introduction of relevant theoretical models,including Mundell Fleming model,purchasing power parity theory,interest rate parity theory,exchange psychology and the theory model of balance of payments theory.The second part is empirical analysis.Firstly,analyze the correlation between short-term international capital flows and RMB exchange rate variables after 2005,then establish VAR model,Through Grainger causality test,impulse response analysis and variance decomposition,this paper draws a conclusion that short-term international capital flows have direct and indirect effects on RMB exchange rate changes,and draws the following conclusions:(1)Short term international capital flows can affect the RMB exchange rate directly.Short term international capital flows can change the supply and demand of local currency in the foreign exchange market,resulting in RMB exchange rate changes.(2)Short-term international capital flows has indirect effect on RMB exchange rate through inflation rate.domestic and foreign interest rate difference can cause the short-term international capital flows,which has indirect impact on the RMB exchange rate,expected RMB exchange rate also affect the RMB exchange rate.In addition,the RMB exchange rate is mainly affected by its own changes in the short term,and has been gradually influenced by other exogenous variables in the long run.