Research On The Impact Of The Development Of Foreign Exchange Derivatives In China On The Transmission Effect Of Monetary Policy

In the 1970 s,with the collapse of the Bretton Woods system,the global financial environment tended to liberalize and to develop,and the exchange rate systems of various countries successively reformed toward the floating exchange rate system.At the same time,China has implemented a historic open-door policy and integrated it into the general environment of economic globalization.In addition,financial innovations since the 1980 s have further promoted the development of contemporary finance.As financial liberalization accompanies economic fluctuations,investors are exposed to a number of risks.Financial derivatives have emerged out of demand for hedging.Financial innovation drives the vigorous development of financial derivatives,making the virtual economy a new type of economic activity that is independent of the real economy,that is,the trend of “breaking into reality” of financial activities.The severity of the influence of the development of derivative instruments on this trend of “going out of reality” needs to draw our attention,because it is related to whether a country's policy authority adopts macroeconomic policies to regulate and control the economy.As China's exchange rate reform continues to advance,research has focused on whether the development of foreign exchange derivatives in China has weakened the conduction of monetary policy.This article begins with the introduction of foreign exchange derivatives,first elaborates on the various categories of foreign exchange derivatives and the development status of China's current foreign exchange derivatives.The second part first compares the interest rate of monetary policy from the intermediate target to the final target.Conducting channels,asset price transmission channels,credit transmission channels,and exchange rate transmission channels have been theoretically explained.Afterwards,how foreign exchange derivatives affect monetary policy has been analyzed.The third part deals with the impact of foreign exchange derivatives on the exchange rate transmission mechanism of monetary policy.Empirical analysis first empirically examines the degree of concrete weakening of the exchange rate transmission mechanism through an ordinary regression model,and then empirically analyzes the interplay between variable factors by establishing a VAR model and finally concludes that the foreign exchange derivatives market is being established.Afterwards,the impact on net exports was weakened,that is,the effect of exchange rate channel of monetary policy was weakened due to the development of the foreign exchange derivatives market.Finally,based on the results of theoretical analysis and empirical tests,the study proposes relevant suggestions for the improvement of China's monetary policy:(1)ensuring the continuous promotion of exchange rate marketization,and(2)the implementation of China's monetary policy should take into account the development of foreign exchange derivatives.(3)Further improve the monetary policy through the flexible use of foreign exchange derivatives,and(4)strengthen the supervision of the foreign exchange derivatives market at the same time.