The Influence Of Central Bank Communication On RMB Exchange Rate Expectation

With the market-oriented reform of exchange rate,the two-way fluctuation of RMB has increased,and overreactions and interpretations in the market will occur frequently.It is an important and arduous task for the central bank to strengthen market communication and expectation guidance.This article explores whether central bank communication can guide RMB exchange rate expectations and which factors will affect the communication effect.It can provide policy advice to the central bank on the rational use of communication,and help to maintain the stability of the foreign exchange market and the development of China's overall economy.Based on the logic of "information delivery-information transfer-information reception",this paper selects three factors that may affect the central bank's communication effect based on the existing researches:the central bank's communication behavior,news reports and hetero geneous expectation.Due to the asymmetry of the impact,this paper uses the EGARCH model to make a comprehensive study of the effects of central bank communication on RMB exchange rate expectations under different channels,different content,and different.contexts.Using the EGARCH model to empirically test the news media continually,which is an important medium for information transmission,and explore whether the number of news reports on the same communication event can promote communication.Finally,MS model and panel data random effects model were used to empirically examine the recipients of information—heterogeneity participants,in order to explore the expected impact of central bank communication on technical analysts and fundamental analysts.In the study of the behavior of the central bank,it was found that central bank communication can play a significant guiding role in RMB exchange rate expectations and can curb fluctuations in the foreign exchange market.Specifically speaking,verbal communication is more effective than written communication;communication that intends to lead devaluation is more effective than intention-directed appreciation;communication during the devaluation period is more effective than during the appreciation period.In studies of news reports,it has been found that an increase in the number of news reports can promote the effectiveness of communication.In a study of heterogeneity participants,it was found that central bank communication can influence the exchange rate expectations of the entire market by affecting the expectations of different types of participants.Finally,we put forward three suggestions according to the conclusions:to make rational use of communication,especially in the period of devaluation;to emphasize the transmission of information and increase communication with the authoritative media;and to manage the participants in the foreign exchange market by classification.