The Empirical Analysis Of The Influence Of The Volatility Of Capital Flows On The Exchange Rate Of RMB

Capital flows is an important manifestation of international economic exchanges.With the increasing development of economic globalization,capital flows among countries has become frequent and violent.The volatility of capital flows reflects the variability of international capital flows.At the same time,with the increasing frequency of international exchanges,exchange rate issues have also become increasingly prominent.However,on the whole,the volatility of capital flows is still a relatively new research field in China.There are not many research literatures and there is no conclusion.At the same time,the current domestic researches are far less concerned with the reasons for the volatility of capital flows,the mechanism of their effects,and their impact on the RMB exchange rate.Therefore,this article first summarizes the existing literature,and on this basis,it makes clear the research direction.Secondly,it qualitatively analyzes the basic theories of the volatility of capital flow and the RMB exchange rate,which focuses on the reasons for the volatility of capital flows and the current situation of China's exchange rate;Combined with the above basic theoretical analysis,the third chapter of this paper summarizes the measurement methods of capital flow size and the volatility of capital flows,and then compares and selects suitable methods for data calculation.At the same time,the third part of the artic le also focuses on the mechanisms of the volatility of capital flows on the exchange rate,which provides further theoretical support for subsequent empirical analysis;The article finally selects Chinese monthly data from January 2005 to December 2016 to construct VAR model,which increases the volatility of capital flows as a new endogenous variable,and describes it using the coefficient of volatility of capital flows.Finally,the impact of the volatility of capital flows on the real effective exchange rate of RMB is discussed through the impulse response analysis and variance decomposition results.In the end,the article put forward proposals to control the risk of volatility of capital flows from the four aspects of improving the domestic financial system,strengthening the monitoring of capital flows,reforming the RMB exchange rate mechanism,and implementing market-based capital management in the short term.This study finds that even if China's capital account has not been fully liberalized,the volatility of capital flows which is concerned gradually in recent years has had a certain degree of impact on the real effective exchange rate of the RMB;Although this effect has a lag period,it will gradually increase,which can reach a level of about 5% on the twelfth issue of the variance decomposition;The volatility of capital flows mainly affects the exchange rate of the RMB by changing the relative supply of domestic and foreign currencies.The volatility of capital flows means that the capital flows into China in large quantities in the beginning and then flows out of China and even reverses.The volatility of capital flows will lead to a gradual reduction in domestic foreign currency supply,which in turn will increase the supply of the RMB and decrease its demand,which will result in a drop in the RMB exchange rate.When the devaluation of the RMB reaches a certain level,it will stimulate the increase of China's exports,which will increase the demand for the RMB and re-flow of capital into China.Then,the exchange rate of the RMB will begin to rise and the RMB will gradually appreciate.The research in this paper has important implications for the monitoring and management of capital flows and the further reform of the RMB exchange rate system.