Economic Policy Uncertainty And RMB Exchange Rate

In recent years,the complexity of the world’s macro-economy has deepened,and the economic policy uncertainty of the world’s major economies has increased significantly.In order to realize the internationalization of RMB,China has also carried out several reforms of RMB exchange rate market after 2005.The impact of economic policy uncertainty on RMB exchange rate is not clear,so this paper analyzes the impact of economic policy uncertainty on RMB spot and forward exchange rate yield and volatility.The results of the research on RMB exchange rate yield show that the increase of economic policy uncertainty in China,the United States and the global economy will depreciate the RMB,and the impact of US economic policy uncertainty on RMB exchange rate yield is greater than the uncertainty of China’s economic policy.From the perspective of term structure,the impact of US and global economic policy uncertainty on exchange rate yield increases with the increase of maturity,so the transmission of economic policy uncertainty to exchange rate returns is the expected channel.After the;"8.11"exchange rate reform,the depreciation effect of economic policy uncertainty on the RMB has increased.The research results of RMB exchange rate volatility are similar to the yield.The increase in economic policy uncertainty will increase the volatility of RMB exchange rate,and the long-term impact of US economic policy uncertainty on exchange rate volatility is greater than China’s economic policy uncertainty.From the perspective of term structure,the long-term impact of economic policy uncertainty on forward exchange rate volatility is gradually decreasing;from the out-of-sample forecast,the prediction accuracy of US economic policy uncertainty is better than China and global economic policy uncertainty.But as the exchange rate term increases,the prediction accuracy gradually decreases.Comparing the spillover effects of economic policy uncertainty on RMB exchange rate yield and volatility,it is found that the spillover effect of economic policy uncertainty on the RMB exchange rate is more reflected in volatility than yield.