Analysis Of The Impact Of Global Economic Policy Uncertainty And The RMB Exchange Rate On China’s Economic Growth And Price Levels

There is no doubt that external shocks will have a significant impact on a country’s economic environment.Under the background of the new normal of China’s economy,the impact of global economic policy uncertainty and the impact of the RMB exchange rate on the domestic economy is increasing day by day.The continuous evolution of Sino-US trade frictions,the brexit of Britain and other international economic and political issues lead to the continuous fluctuation of global economic policy uncertainty and the increasingly complex international environment,which will inevitably have an adverse impact on China’s economy.At the same time,due to the constant impact of international economic and political events on the RMB,scholars from all walks of life have begun to pay extensive attention to the impact of the RMB exchange rate as an important foreign economic exchange indicator on China’s economy.On the one hand,the global economic policy uncertainty will affect confidence,expectations and the behavior of economic entities,resulting in macroeconomic fluctuations;on the other hand,the RMB exchange rate affects domestic macroeconomics by affecting FDI,import and export and other economic factors.At the same time,as an asset price,the exchange rate is bound to be affected by various internal and external shocks.As an external shock,the global economic policy uncertainty will be transmitted to the RMB market and then affect the domestic economy,that is,it will affect China macroeconomics through the channel of “ Global Economic Policy Uncertainty → RMB Exchange Rate → Macro-economy”.This article first constructs and derives the Mundell-Fleming model that incorporates global economic policy uncertainty,RMB exchange rate,economic growth and the price level.Then,in this article,theoretically,a new variable is added to the Mundell-Fleming model: the variable of global economic policy uncertainty.The extended model is used to analyze the asymmetric conduction effect of exchange rate and uncertainty variables on the domestic economy.Finally,on the basis of theoretical analysis,this paper collects and collates data on global economic policy uncertainty,RMB nominal effective exchange rate,and China’s economic growth and the price level.The NARDL model is used to conduct an empirical test on this asymmetric impact,and a robustness test is also performed.The results of the counterfactual experiment further confirmed the asymmetric conduction effect of the global economic policy uncertainty,the RMB exchange rate,economic growth and the price level,and according to the robustness test,the results remained stable.The empirical results show that there is a long-term and short-term asymmetric conduction effect between global economic policy uncertainty,economic growth and price levels.The decrease of global economic policy uncertainty promotes economic growth and price level more than the increase of global economic policy uncertainty inhibits economic growth and price level.There is a short-term asymmetric transmission effect between RMB nominal effective exchange rate and economic growth and price level.The appreciation of RMB promotes economic growth and price level,while the depreciation of RMB inhibits economic growth and price level,and there is a time lag in this inhibition.Next,in the robustness testing section,this article uses the PPP-adjusted GDP-adjusted global economic policy uncertainty variable and the RMB effective exchange rate variable as the proxy variable of the current price of GDP-adjusted global economic policy and RMB nominal effective exchange rate variable used in the above empirical part to conduct robustness test In this part,we also test the robustness of the intermediate conduction mechanism,and the results of this part are stable.