Analysis Of Macro Policy Effect Of RMB Exchange Rate Regime Reform:2001-2017

After the reform of the exchange rate system on 11th August 2015,the RMB exchange rate liberalization mechanism has been continuously improved a lot,while its impact on the macro-economy has become increasingly complex.This paper uses the macro data from 2001 to 2017 to analyze our country's monetary policy and the balance of payments.We suppose that more flexible exchange rate will improve the monetary policy effect and balance of payments.Taking part in the WTO has led to a significant impact on foreign trade and capital flows for China,so we choose the data after 2001 to guarantee the significance of results.The major research method is SVAR model.Firstly,based on the exchange rate transmission of macroeconomic policy in our country,we use the data between January 2001 and June 2017 to estimate the effect of monetary policy.When it comes to the reforms of the exchange rate system in August 2005 and 2015,we compare the differences of China's monetary policy in different periods.Secondly,according to the theory of exchange rate transmission,we study the long-term co-integration relationship between exchange rate and foreign trade.After implementing the structure of the impulse response analysis and forecast error variance decomposition,we could know how different variables reflect on the import and export in the long time.Three conclusions have been summarized:(1)After the reform of the exchange rate system,the exchange rate is more elastic and the market-based mechanism has gradually been established;(2)After the exchange rate system reform,the effectiveness and autonomy of China's monetary policy have been improved.And the price monetary policy tools have been generating better governance effect on inflation than those of quantitative monetary policy tools.(3)As to the control of balance of payments,the management of foreign exchange rate is still popular while the impact of exchange rate fluctuation must be concerned.In the future,we are supposed to pay more attention to the exchange rate fluctuation of our country in the management of international revenue and expenditure,which not only prevent the risk of foreign exchange market but also make full use of the beneficial effects of exchange rate volatility on China's foreign trade development.We propose the following policy recommendations.Firstly,we should increase the elasticity of RMB exchange rate to match the exchange rate policy and monetary policy better.Secondly,the central bank must take into account the fluctuation of foreign exchange market when they formulate the monetary policy,which is helpful to improve the expected effectiveness of macro policy.Thirdly,in order to fundamentally solve the problem of abnormal exchange rate fluctuations,monetary authorities need to positively guide the RMB exchange rate expectations,and generally diversify the trading products of foreign exchange market,especially financial derivatives and other risk hedging instruments.Lastly,we should strengthen related financial regulation system,establish warning mechanism to prevent speculative currency attack and reduce the impact of cross-border capital flows to guarantee the stable development of national economy.