Effect Of The Central Bank's Policy Communication On Foreign Exchange Market

With the development of monetary policy practice and rational expectation theory,central banks realized gradually that the impact of public expectation must be considered when making monetary policy.Central bank policy communication,as an important tool for the central bank to manage the public expectations,is attracting more and more attention from the central banks all over the world.In the past decades,the central banks of the mature economy have found that the central bank can design the appropriate communication channels to guide the market anticipation to a certain extent,reduce the uncertainty faced by the decision-making of the economic subject,and thus achieve the effective market effect to improve the policy implementation and stabilize the macro economy.To reduce social welfare loss and other multiple policy objectives.Improving the central bank's policy communication mechanism,guiding market expectations and improving the effectiveness of monetary policy is one of the important tasks of deepening financial system reform in China.The policy communication of the central bank is considered to be a new policy tool that can be used to make up for the defects of traditional monetary policy because of its fast transmission speed and strong flexibility.In recent years,central banks have gradually realized that the formulation and implementation of monetary policy is actually an art of managing expectations.Through the policy communication of the central banks,the expectation of the monetary policy to guide the economic subject is reached.In theory,it can effectively improve the effectiveness of the monetary policy and reduce the volatility of the market.However,what the real effect of central bank policy communication as a new monetary policy tool is in practice must be tested by empirical data.Based on the results of China European Central Bank's practical experience,the results are as follows:(1)the central bank policy communication is positive to the short-term fluctuation of the RMB exchange rate,and has a certain influence on the medium and long term exchange rate fluctuations;at the same time,the policy communication can reduce the volatility of the exchange rate;(2)the effect of the tight policy is superior to the loose communication effect.Fruit.Tight policy communication increases market exchange rate significantly,while loose intention to policy communication makes market exchange rate decrease significantly.(3)the communication effect of the European Central Bank policy is more significant than that of the people's Bank of China.Compared with the monetary policy of the mature market economy countries,the effect of the policy communication of the people's Bank of China is weaker than the ECB.This result may prove the effect and smoothness of the central bank's influence on the RMB exchange rate market through the policy communication mechanism and channel in our country.It still needs to be improved.In order to give full play to the role of central bank policy communication in monetary policy operation,it is necessary to further accelerate the process of exchange rate marketization,improve the communication mechanism and exchange rate regulation mechanism,enhance the sensitivity of the market exchange rate to monetary policy,and make the central bank's policy communication more smooth,in order to improve our country's foresight and effectiveness of monetary policy.