Research On The Endogeneity Of Money Supply Based On The Linkage Of Interest Rate And Exchange Rate

The endogeneity of money supply is a key factor in determining the effects of monetary policy.This article is based on the theory of extended interest rate parity and combines China's national conditions to study the relationship between interest rates at home and abroad,the exchange rate of the renminbi arid the endogenous supply of money.This is an important macro foundation for investigating the effectiveness of monetary policy in the process of financial marketization and liberalization under the conditions of an open economy.It has good academic research value and policy guidance significance.This article first uses the 2015-2017 quarterly empirical data and uses empirical methods to judge the linkage between China's domestic and foreign interest rates and the RMB exchange rate.It finds:(1)whether it is domestic interest rates or foreign interest rates represented by US interest rates,the linkage relationship between them and RMB exchange rates is one-way,that is,the interest rate has an impact on the exchange rate,whereas the exchange rate has no significant effect on the interest rate;(2)The linkage between the two interest rates and the RMB exchange rate is relatively weak,but the linkage relationship between the US interest rate and the RMB exchange rate is obviously stronger than the linkage relationship between the domestic interest rate and the RMB exchange rate,and this linkage has become more and more obvious in the process of dynamic evolution,but the linkage relationship between the RMB interest rate and the exchange rate has not been significantly strengthened with the passage of time;Then,judging from this empirical judgment,we assume that the linkage between interest rate and exchange rate in China is assumed to be the linkage between the US interest rate and the RMB exchange rate.Based on this premise,combined with China's macro financial background,we analyzed how the impact of foreign interest rate fluctuations has affected the endogenous process of China's money supply through the linkage of interest rates and exchange rates.After that,the VAR model and the error correction model were used to test the analytical analysis to verify the relevant theoretical viewpoints.Finally,from the aspects of monetary policy formulation,financial marketization reform,capital account opening and supervision,and the transformation of monetary intermediary targets,we propose effective suggestion to reduce the endogenous supply of money in order to improve the effectiveness of monetary policy in the context of stronger linkage between foreign interest rates and the RMB exchange rate.