Analysis On Volatility And The Policy Effect Of RMB Exchange Rate

The exchange rate is an essential precondition for commodity trading and capital circulation between countries all over the world.It is an important bridge for the finance,commodity,economy and trade exchanges between countries.Therefore,the study of exchange rate's changes and volatilities will do impacts on economic society of countries in the world.The exploration of the current trend and the volatility characteristics of the exchange rate market can help us grasp the internal rules among the countries all over the world,so that we can deal with the impact and shock of exchange rate volatility on the trading economy of countries better.On the other hand,the changes of economic society will also have influences on the profitability and volatility of the exchange rate market,which will lead to changes in the volatility characteristics of exchange rate returns.Therefore,using a certain of measurement methods to model and analyze the trend and the characteristics of the exchange rate,we can carry a deep exploration and support of the exchange rate market under the background of a managed floating exchange rate system.Based on the existing relevant theories and studies of exchange rate volatility by domestic and foreign scholars,this paper uses the USD/CNY exchange rate as an example to conduct the study on the volatility characteristics of RMB exchange rate and the policy effect on RMB exchange rate.In the part of RMB exchange rate volatilities,this paper mainly study on the volatility characteristics of RMB exchange rate using the USD/CNY exchange rate data from August 1,2005 to December 29,2017.Specifically,based on the stationarity,heteroskedasticity,asymmetric effect and long term memory function of financial time series,we porform the stationarity test,ARCH test,R/S test,and establish GARCH model and FIGARCH model.The empirical results show that the USD/CNY exchange rate is suitable to be fitted by FIEGARCH.This sequence has the asymmetric effect and long term memory function.For the study of the policy effect on RMB exchange rate,based on the monetary policy of China and the Fed's policy in the past three years,this paper uses USD/CNY exchange rate data in the past three years as a sample.The empirical study was conducted on the impact of China's domestic RRR cut and the Fed's policy of raising interest rates on the USD/CNY exchange rate.The empirical results show that the central bank's rate cut policy and the Fed rate hike policy increased the USD/CNY exchange rate.