The Influence Of International Capital Flow On Rmb Exchange Rate

After the reform and opening up,in order to slow down the pressure of insufficient funds in the process of economic development,China actively introduced foreign capital and laid the foundation for the development of export-oriented economy.After China's economic development has entered the fast track,the continued expansion of the balance of payments "double surplus" and high foreign exchange reserves have gradually become a powerful weapon for the US and other countries to revalue China's RMB.In order to stabilize the development of the national economy,China's capital account has not yet been fully opened and the rate of change of the RMB exchange rate has been limited.In the current reform of exchange rate system and can not be the case,to explore the influence of international capital flow on the RMB exchange rate has a certain theoretical and practical significance.Under the background of exchange rate market reform and capital account opening,this paper summarizes the characteristics and progress of existing research by reviewing relevant Chinese and foreign literatures and analyze its impact on the RMB exchange rate by classifying international capital flows as long-term capital flows and short-term capital flows.First by statistics and status description of the research object,found that benefit from the increase of capital account openness in China,the scale of international capital flow is more and more big,the capital flow more smoothly,and with the deepening of China's marketization of exchange rate reform process,the volatility of the RMB exchange rate increased,the exchange rate flexibility increased,the exchange rate reform has achieved some results.Then,distinguished with the long-term capital flow and short-term capital flows combined with labor productivity,trade openness,money supply increment,China and the United States interest rate difference,through the establishment of VAR model understand how the different capital flows affect the RMB exchange rate.After the impulse response analysis,it was found that the long-term net capital inflow will cause the renminbi to appreciate,while the short-term net capital inflow will cause the renminbi to depreciate and then appreciate.After variance decomposition,we find that because of China's control over the RMB exchange rate and capital account,the long-term capital flow has a stronger explanation for the RMB exchange rate fluctuation.Then,in order to analyze whether the influence of international capital flow on exchange rate will change significantly under different conditions of exchange rate,the Markov Switching model is introduced.Markov Switching model shows that the degree and direction of long and short term capital impact on exchange rate are different under different exchange rate changes.In the state of RMB appreciation,short-term capital inflow resulted in an increase in the real effective exchange rate of the RMB,and the long-term capital inflow resulted in an increase in the real effective exchange rate of the RMB,but the results were not significant.Under the devaluation of the RMB,the short-term capital inflow resulted in an increase in the real effective exchange rate of the RMB and significant results.However,the long-term capital inflow resulted in a decrease in the real effective exchange rate of the renminbi,but the result was not significant.Finally,according to the empirical results,it is suggested that China should improve the efficiency of foreign direct investment,strengthen the detection and regulation of short-term international capital flows,and supervise the capital flow based on status.