Research On The Effect Of RMB Exchange Rate System Reform On Monetary Policy Effectiveness

The reform of the RMB exchange rate system was launched in July 2005,from the peg to the single dollar to the decision to move forward the managed floating exchange rate system in an orderly manner.At the same time,the floating range of the exchange rate was expanded to 0.3 percent and the central parity rate of the dollar against the RMB was adjusted to 8.11 from 8.2765.From the point of the RMB exchange rate flexibility,we can put the reform of the RMB exchange rate system is divided into two stages: the first stage,before the middle price and market price system namely before the 811 revaluation,the range of floating exchange rate has experienced(July 2005)expand from 0.3% to 0.5%(May 2007)and then to 1%(April 2012)to 2%(March 2014),during this period,however,does not improve the RMB exchange rate flexibility,expansion of only a single band.Among the second stage,the market price and the price system(August 11,2015)and middle price quotation mechanism of perfect(February 2016)makes the RMB exchange rate flexibility began to expand,which produces nearly 3% of the median and the closing price of floating range.Before the exchange rate system reform,in order to maintain the stability of the exchange rate in China is often through the way of foreign exchange on the basis of a lot of money,the central bank in order to overcome the sudden increase of monetary base due to the domestic inflation pressure,the central bank usually take high reserve requirements such as tightening monetary policy to adjust the monetary base,and the flexibility and effectiveness of monetary policy will be limited,but as the revaluation,in under the background of the expansion of the exchange rate fluctuation interval,the central bank can need not to maintain the stability of exchange rates and foreign exchange through the way of the hedge was forced to put on the currency,Central bank may,in accordance with the rationality of the exchange rate and economic conditions to take appropriate monetary policy,which can be more targeted to solve economic problems,that is,with the reform of RMB exchange rate regime,the central bank in the implementation of monetary policy can be more independent and flexibility,so whether the RMB exchange rate system reform as mentioned that the effectiveness of monetary policy has been enhanced is going to discuss the contents of this paper.This paper firstly introduces something about exchange rate policy and monetary policy effectiveness,and different exchange rate system impact on the effectiveness of monetary policy in the classic theory,and then use the revised "M-F" model from the theoretical analysis of monetary policy effectiveness is affected by the renminbi revaluation,theoretically analysis before the yuan and the renminbi revaluation after the implementation of the monetary policy effect,second,to the effect of monetary policy before the yuan andthe renminbi revaluation the conduct of monetary policy effect after reality analysis,combined with the study to the classical theory of related variables in determining the selection on the basis of empirical test,So as to get the reality and empirical analysis,the purpose of mutual authentication of variable selection before and after the yuan monthly data as sample,variables main selection for M2,CPI,the yuan against the dollar and consistent economic sentiment index and foreign exchange reserves,then use ADF test method to test whether the variable has the stability,prevent spurious regression,smooth if the time series data,cointegration test is required,if the time series data is not smooth,the cointegration test,and then to causality test,at the same time in order to guarantee the validity of the test result of the var model,AR root figure inspection again,And impulse response analysis and variance decomposition and impulse response analysis and variance decomposition results before and after the renminbi revaluation,at this point,to come out before and after the revaluation of the impulse response analysis and variance decomposition,this paper compares and analyzes the results of the final conclusion shows that:First,from the perspective of impulse response analysis,RMB exchange rate reform has enhanced the effectiveness of monetary policy.This may be because the effect of monetary policy before the reform is greatly affected by the change of foreign exchange reserves.Secondly,from the results of variance decomposition,the influence of monetary policy on the macro-economy has increased after the reform of RMB exchange rate,which further supports the results of impulse response analysis.According to the analysis of the RMB exchange rate system reform makes the effectiveness of monetary policy to be enhanced,in this paper,in the final in order to balance the relationship between the exchange rate system and monetary policy,at the same time in order to make more significant effect of the conduct of monetary policy,thus puts forward five Suggestions,mainly including: implement with "internal balance first" for the principle of yuan policy,change of currency intervention mechanism,create the condition of the full convertibility,perfecting related to foreign currency interbank market and deepen the process of interest rate liberalization.