A Study Of The Correlation Between Exchange Rate And RMB Internationalization

The status of a country's currency is closely related to its economic strength.With the reform and opening up and China's economic exhibitions,China has become the second largest economy in the world,and the role of RMB in the world monetary system is becoming more and more important.Since 2009,RMB denominated settlement,financial transactions,reserve currency and other functional aspects are developing rapidly,the rapid development of RMB trading infrastructure and the offshore RMB market in Hongkong as the representative of the offshore RMB market to reduce the RMB transaction cost,strengthen the liquidity of RMB assets,the assets of RMB in the international market much more attractive.In November 30,2015,the International Monetary Fund introduced RMB into the basket of special drawing rights(SDR),which means that as an international currency,the yuan began to be recognized by the international community.The internationalization of RMB has achieved some results.In August 11,2015,the people's Bank of China made a reform of the formation mechanism of the intermediate price of the RMB exchange rate.From then on,the RMB continued to depreciate in May 2017.With the depreciation of RMB,the internationalization of RMB has also slowed down.From the aspects of valuation,settlement and financial transactions,we can see that RMB internationalization has entered the market adjustment stage from the stage of rapid growth.Therefore,the study of the interaction between the RMB exchange rate and the internationalization of RMB has become an important issue in the process of promoting the internationalization of RMB.First of all,we review and summarize the related literature at home and abroad,understand the research perspective and research trend of scholars at home and abroad,and analyze the significance and ideas of this study combined with the current research background.Then we comb and summarize the past scholars' research on currency substitution theory,and then analyze the transmission mechanism between RMB exchange rate,RMB exchange rate expectation and RMB Internationalization Based on the current situation of China,providing theoretical basis for the following research.Then we use theinductive logic method to describe the current situation of RMB exchange rate and RMB internationalization,and analyze the trend of the two changes.We find that the two are in the same direction.It provides a practical basis for the following research.Based on the above analysis,based on the theoretical and practical basis,we build an VAR model to empirically study the relationship between RMB exchange rate,RMB exchange rate expectations and RMB internationalization.Finally,the research results are summarized and the corresponding suggestions are put forward.The empirical results show that: first,the formation of the appreciation of the RMB exchange rate and the expectation of the appreciation of RMB will be beneficial to the improvement of the internationalization level of the RMB in the short term.Second,the international level of RMB will improve the appreciation of the RMB exchange rate in the short term and the expectation of further appreciation of the RMB.Third,in the short term,when the depreciation rate of RMB is too fast,the expected depreciation rate of RMB will decline,or when the RMB appreciation rate is too fast,the expected appreciation rate of RMB will decline.