The Study On The Currency Mismatch In China

Currency mismatch is ubiquitous in emerging markets, and the serious currency mismatch may have great impact on the finance and economy of the country. Firstly,this paper has an overall analysis on the traits of China from 1986 to 2005 with comparative and historical study, and it finds that there exists comparatively serious currency mismatch in China and it can be fallen into four phrases on its development. Secondly, this paper takes an empirical test on the reason of China's currency mismatch with cointegration tests and Granger causality tests. And the result indicate that the currency mismatch of China has been greatly influenced by the size of the country's economy, the level of the financial market, real effective exchange rate and so on. Thirdly,we analyze the effect on the monetary policy and the official nominal exchange rate with the Negative Risk Premium Thoery and the Partial Equilibrium Model, and also we set a model to explain the mechanism. At last, this paper gives some policy suggestions to control currency mismatch risk.