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RMB exchange rate changes on prices and asset prices Empirical Analysis

Author: ZuoPeiQiang
Tutor: DaiBingRan
School: Fudan University
Course: Finance
Keywords: Exchange rate pass- Nominal effective exchange rate RMB NDF Commodity price Asset prices
CLC: F832.6
Type: PhD thesis
Year: 2010
Downloads: 2875
Quote: 5
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Abstract


Starting in 2000, the domestic and more people study the RMB exchange rate movements on the impact of the price, July 21, 2005, People's Bank of China announced that two percent appreciation of the renminbi, China began to implement a managed floating exchange rate system, the exchange rate from fixed to floating , led to academic exchange rate changes on extensive research on the economic impact. One research focus is the renminbi exchange rate changes will affect the price level, the RMB appreciation is to help prevent inflation, which is China's monetary policy must be addressed. Another study focused on how the impact of exchange rate movements in asset prices, after all, from Japan, Germany, Taiwan, currency appreciation experience, the currency appreciation is often accompanied by a sharp rise in asset prices, our country started the reform from 2005, stocks and real estate markets have increased substantially and the next will be how to interpret? article is in this context, the analysis seeks to answer the above questions, this paper is divided into six chapters. The first chapter is the introduction, mainly to explain the background of this writing and writing sense, this paper describes the structure and research methods, the text of the main concepts involved in a brief statement that describes innovation of this paper and inadequacies. The second chapter is the literature review were summarized impact of exchange rate on prices and exchange rate changes on asset prices affect the relevant literature. Previous studies generally are the two things separately, and this article will be based on monetary perspective, the impact of exchange rate changes on prices and the impact of exchange rate movements on asset prices combined analysis. Chapter III examines the empirical nominal effective exchange rate movements on prices conduction effects and influencing factors, this section first Taylor (2000) model is improved, then for January 2000 to April 2009 the nominal effective exchange rate, imported goods price index, corporate goods price index, consumer price index and money supply (M1) and other five indicators empirical analysis of monthly data. The purpose of this section there are two, one empirical analysis on China's RMB exchange rate changes affect the price level, analysis of the RMB exchange rate pass-effect factors for China's central bank's exchange rate policy and monetary policy implementation to provide a theoretical basis; two is the use of new data on the results of previous studies for testing. Chapter empirical analysis found that: a long period, nominal effective exchange rate appreciation will drive consumer prices, but the effect is weak. In particular, since the mid-2006 to the first half of 2008, nominal effective exchange rate appreciation is always accompanied by the rise in the consumer price index. This conclusion is different from the domestic research findings of others. This is explained in this paper, and the RMB exchange rate on the price of the main transmission mechanism are discussed, the money supply mechanism is the current RMB exchange rate affect the price of the main mechanisms, in addition, from the empirical data can be seen in recent years, China's asset prices and price linkage between the increasingly apparent. The fourth chapter is in chapter based on the analysis of the deepening of empirical analysis on China's RMB exchange rate is expected to change in asset prices and further discuss the RMB exchange rate is expected to change, the prices and the linkage between asset prices. Unlike Chapter III, the part of the selected indicators are empirical analysis and financial market-related indicators, including RMB NDF calculated based on expected changes in the RMB exchange rate, stock index, real estate index, consumer price index and the broad money supply (M2) . In the specific exchange rate targets of choice, this article RMB NDF calculated according to expected changes in the RMB exchange rate, this indicator can better reflect the asset markets, investors expect the RMB exchange rate changes, the use of this indicator is to study, but also an article innovation. In the arrangement of contents, the first part of the portfolio model is modified, and the exchange rate, prices, asset prices and money supply and other indicators of the interaction between a simple theoretical analysis; second use of relevant indicators monthly data, the use of econometrics analysis methods for investigating changes in the RMB exchange rate is expected to impact on asset prices; Section III empirical main conclusions obtained are compared with the results of previous studies, combined with our current economic operation practice, the main conclusions to be reasonable explanation. That part of the empirical research, found some useful conclusions are: the RMB exchange rate will affect the expected change in asset prices, in particular: RMB appreciation is expected, will lead to rising stock prices and housing prices, and the impact on stock prices faster, impact effect is greater. Exists between asset prices and price linkage between both short and long term, asset prices would generate impetus prices; short periods, shares stimulating effect on prices faster, the effect is more pronounced, and long periods, prices on prices stimulating a greater role. RMB appreciation expectations, the money supply mechanism is the main mechanism affecting asset prices. The fifth chapter is examine international experience, the part selected groups of countries, one in Japan and Germany, Japan and Germany during the rise of the economy, have also experienced a currency appreciation process, this section will focus on the appreciation of their currencies in the process of investigation , the exchange rate changes on prices and asset prices, examine the role of monetary policy in which. The other countries in Southeast Asia Shikoku investigated before and after the 1997 Asian financial crisis in Southeast Asia Shikoku exchange rates, commodity prices and asset price changes and to analyze the role of monetary policy in which. International experience studies verify Chapters III and IV of this article's conclusion that, in the international context, changes in exchange rates and asset prices affect the price mechanism, the monetary policy is the key to this and the situation in China is the same. In addition, international experience also gives us examine the following aspects of learning: Monetary policy should focus on asset prices, prevent asset bubbles; monetary policy and exchange rate policy should be independent; exchange rate regime should enhance flexibility, ability to the economic situation, unless there is real-time adjustment. Chapter VI is the conclusions and policy recommendations, based on the preceding analysis, based on China's monetary policy and exchange rate policy made the corresponding recommendations. Monetary policy recommendations are as follows: control asset bubbles, China is currently one of the main tasks of monetary policy, specific measures have two aspects, one is a moderately tight monetary policy to reduce the money supply growth rate. Is structured to take monetary policy and credit policy, targeted control of asset price bubbles. Exchange rate policy recommendations are as follows: The current pegged exchange rate system needs to be adjusted, you need the flexibility of the exchange rate regime, exchange rate policy should also focus on asset prices; enhance exchange rate flexibility, the RMB exchange rate should adopt the principle of discretionary; gradual exchange rate appreciation is not desirable the need to take effective measures to control the appreciation of the renminbi is expected to control asset price bubbles; may consider raising wages and other production factor prices, with the appreciation of the real exchange rate to offset the yuan's nominal exchange rate appreciation.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Exchange rate,foreign financial relations
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