A Study Of The Dynamic Relationship Between The RMB Exchange Rate Fluctuation And The Short-Term Capital Flows Volatility

Exchange rate marketization has always been an important part of China's financial reform.Since 2005,China has carried out a series of reform of the exchange rate mechanism to accelerate the market process of the exchange rate With the deepening of the marketization of exchange rate,the fluctuation range of exchange rate has gradually eased and the fluctuation of RMB exchange rate has increased.The volatility of exchange rate is more closely related to cross-border capital flows.The inflow of cross-border capital is a double-edged sword.On the one hand,it can provide financial support and experience guidance for our country's economic construction,on the other hand,it will impact the exchange rate and capital market of our country.The study of the dynamic characteristics of the relationship between exchange rate fluctuations and cross-border capital flows is beneficial not only to the further stable and scientific progress of exchange rate marketization.but also to the more effective and forward-looking management of cross-border capital flows in China.Through the establishment of the GARCH(1.1)model and the TVP-SV-VAR model,this paper attempts to make an accurate and clear description of the dynamic correlation between the RMB exchange rate fluctuation and the short-term cross-border capital flow.The model study shows that there is a significant and time-varying relationship between the RMB exchange rate expectation,the volatility and the short-term cross-border capital inflow,and the relationship parameters of the exchange rate expectation and volatility on the short-term cross-border capital flow change with the change of the risk premium and the external environment,with the deepening of the Marketization of the RMB exchange rate.The short-term cross-border capital flow has a significant impact on the volatility of the RMB exchange rate,while the impact of exchange rate fluctuations and exchange rate expectations on short-term cross-border capital flows is greatly influenced by the external environment.Generally speaking,when the exchange rate is expected to appreciate,the rise of exchange rate fluctuation increases the short-term cross-border capital inflow.When the exchange rate is expected to devalue,the exchange rate fluctuation will increase to reduce the short-term cross-border capital inflow.In view of the results of the empirical study,this paper puts forward a series of relevant policy recommendations:the implementation of a capital flow management tool which combines macro Prudential policy and capital control,perfect the monitoring and early warning system for cross-border capital flow,a sound macro Prudential Management Policy and capital control measures,and the strengthening of the foreign exchange market.Macro-control?Such as prudently pushing forward the gradual reform of exchange rate marketization,and strengthening the reasonable guidance of exchange rate expectations.The main innovation of this paper is the use of a nonlinear TVP-SV-VAR model and a targeted study of the interaction of exchange rate fluctuations and short-term cross-border capital flows...