The Analysis Of Transmission Mechanism And Management Effectivess Of Rmb Foreign Exchange Rate Expectation From The View Of Reforms

As an important variable in the macroeconomic research,expectation is the anticipation and judgment of the economic subject on the future change of the uncertain economic variables.The collapse of the Bretton Woods system in the 1970 s leded the western developed economies to adopt a floating exchange rate system.Fluctuations in the foreign exchange rate affected the market’s expectations of future foreign exchange rate movements.Foreign exchange rate expectations also played an important role in the foreign exchange rate movements.The related researches of foreign exchange rate expectation were gradually emerging in that pierod.For our country,since RMB foreign exchange rate formation mechanism restarted in 2005,the RMB foreign exchange rate has undergone several cycles of appreciation and depreciation.At the same time,the RMB foreign exchange rate expectation has also shown different characteristics at different periods.From 2005 to 2007,RMB appreciated unilaterally and the speed of appreciation gradually increased.Appreciation promoted the expectation of appreciation and in turn accelerated the pace of appreciation.From 2008 to 2010,RMB foreign exchange rate remained relatively unchanged due to the international financial crisis.The expectation of RMB appreciation also disappeared.From 2010 to August 2015,RMB mainly showed a tendency of appreciation against the U.S.dollar,but the difference in the internal and external economic situations at this time gradually became a potential devaluation of RMB.After the foreign exchange reform on August 11,2015,releasing channel of RMB foreign exchange rate expectations was enlarged.RMB depreciated in short term,and recovered to fluctuate bilaterally in long term.The change of foreign exchange rate expectation is accompanied by the change of exchange rate,which highlights the important role of foreign exchange rate expectation in perfecting RMB exchange management and realizing internal-external equilibrium in the economy.From another point of view,since RMB foreign exchange rate formation mechanism reform in 2005/7/21,after repeated reforms,RMB foreign exchange rate has evoluted towards market-oriented direction continuously.Many scholars have conducted theoretical and practical studies about the reforms,but studies due to RMB foreign exchange rate expectations are very limited.This paper argues that RMB foreign exchange reforms not only promote the marketization of RMB foreign exchange rate,but also increase transmission mechanisms and management effects of RMB foreign exchange rate expectation,which need to be anylized deeply.After reviewing relative literature,this paper compares the transmission mechanisms and management effects of RMB foreign exchange rate expectation before and after RMB foreign exchange rate reforms,using Almekinders’ game model of Sterilized Intervention through signaling channel as the theoretical basis.We find that RMB foreign exchange rate reforms distinctly optimize RMB foreign exchange rate expectation and validate the process of “Exchange Intervention → xchange Interventiontion andg chanexchange rate market”.The empirical research contains three parts as follow.Foreign exchange reforms changed the characteristics of RMB foreign exchange rate expectation.The increasing market-based factors in the exchange rate formation mechanism enhanced the ability of the market to tolerate changes in the foreign exchange rate.It helped the unilateral expectation of appreciation(depreciation)to be released in a timely manner and avoided the expectation influencing the foreign exchange market in the long term.As a result,the difficulty for the government to manage foreign exchange rate was reduced.At the same time,the time and method of the foreign exchange reforms also played crucial roles in the final realization of their effects.To a certain degree foreign exchange reforms changed the relationship between RMB foreign exchange rate expectation and spot exchange rate.The expansion of foreign exchange rate volatility helped to solve “appreciation(deprecciation)expectation→appreciation(deprecciation)pappreciation(deprecciation)expectation” alternate spiral problem.Under the combined effects of volatility expansion reform and middle rate reform,foreign exchange rate expectation in the short term effectively affected the foreign exchange rate movement and maintained relative independence on the foreign exchange rate,creating an ideal policy environment for managing exchange rate expectation and spot exchange rate.Foreign exchange reforms promoted the marketization of the domestic foreign exchange rate of RMB,making the relationship between the domestic foreign exchange rate expectation and the overseas foreign exchange rate expectation closer than before and effectively increasing the leverage of the domestic market in the long-term conduction mechanism.The effect was to make the relatively small transformation of domestic exchange rate influencing the overseas market significantly,which evidently improved the efficiency of RMB exchange rate management and consolidated domestic market as RMB exchange rate center.At the same time,after the foreign exchange reform the ability of domestic market to respond to the overseas foreign exchange rates expectation’s concussion significantly increased,indicating that the carrying capacity of domestic RMB foreign exchange market improved effectively.The effect of foreign exchange intervention on exchange rate expectation undergone a significant change after the foreign exchange rate reforms.Foreign exchange rate volatility expansion and marketization of middle rate enabled two-way interaction between exchange rate expectations and foreign exchange intervention.It increased the interventions’ time accuracy and the operational effects.However,the improper time of the reform increased exchange rate expectation fluctuation caused by intervention,which weakened the implementation effect of reform policy to some extent.After the theoretical and empirical research,this paper makes suggestions on improving expectation management,strengthening the construction of the foreign exchange market mechanism and promoting the capital account convertibility based on the realistic choice and development goal of China’s exchange rate system.