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Issuing on the Adjustment for Exchange Rate Forming Mechanism of RMB Based on the Currency Basket

Author: CuiJunFeng
Tutor: WangQianHong
School: Donghua University
Course: Industrial Economics
Keywords: Currency basket RMB exchange rate Formation mechanism Manifestations
CLC: F224
Type: Master's thesis
Year: 2007
Downloads: 20
Quote: 1
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Abstract

After the Southeast Asian financial crisis, the Chinese government makes the formation of the RMB exchange rate of the U.S. trade surplus increases gradually evolved to a fixed exchange rate system pegged to the dollar in real terms. But with the the dual surplus phenomenon of economic globalization and China's long-term, the U.S. dollar depreciation is expected to increase, and the RMB exchange rate formation and adjustment problems increasingly become a discussion of attention. For the case of the formation of both stability and flexibility of the RMB exchange rate, come to the market is an inevitable choice. But in terms of the stage of development of China's economy and financial markets, the full realization of the floating of the RMB exchange rate is clearly impossible. How to seek a stable trend of floating the main no lack of flexibility of the exchange rate and the exchange rate formation mechanism is the core of this article to discuss, and take this to the RMB exchange rate formation towards full floating select a transitional exchange rate arrangements. The approval of the State Council, since July 21, 2005, China began to implement a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. The reform of the RMB exchange rate system out of an important step to provide a good foundation for the reform of the RMB exchange rate regime, provided the conditions for China to move toward a floating exchange rate system. In view of this, the paper first start from the discussion of the RMB exchange rate formation mechanism to sort out the basis of the existing literature on the specific composition of components of the RMB exchange rate formation mechanism; then use history - institutional exchange rate history analysis, discussion of the manifestations of the exchange rate of the monetization of gold, a single national currency, the national currency and a basket of currencies in different historical stages and institutional conditions. De facto peg to the single currency's exchange rate formation mechanism, in the environment of economic globalization, with the diversification of China's trade structure, often appear to currency mismatch, and increased speculative pressure and the macro-control of the microstructure of rigid. From an economic sense, the implementation of the policy with reference to a basket of currencies to avoid the interference of exchange rate fluctuations, thereby maintaining the competitiveness of the trade sector and major export markets steady. Secondly, the paper focuses on the currency basket of build targets, the choice of the currency in the currency basket as well as the weight of the basket of currencies established rules; open a basket of currencies consisting of the possibility of the use of game theory, then changes in the history of the RMB exchange rate regime stage division of the exchange rate system reform and the status of the current economic reform in China, and the use of path dependence theory to explain the manifestations of the RMB exchange rate is the basis of its intrinsic and exogenous currency basket. Finally, by introducing the model of Ogawa British rule on the currency basket the realization of the objectives of economic policy analysis. In this paper, the study of the exchange rate formation mechanism, the use of different methods to split into different components, and the detailed analysis of each component and factors affecting the exchange rate formation can be found. Put forward by the manifestation of the exchange rate level, the \After all, the currency basket is just a form of expression of the transition period in the exchange rate arrangements, its natural nor is the beneficial rather advantageous arrangement. Thus to stabilize the exchange rate level, part of the economic goals still need a currency basket in other exchange rate formation mechanism composed of components or the combined effects of economic policy.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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