The Study On Our Country's Exchange Rate Transmission Mechanism Of Monetary Policy In An Open Economy

Reform of the RMB exchange rate regime pegged to a basket of currencies float management system in July 2005, becoming the conditions of exchange rate playing leverage to the real economy. Whether will the conduction efficiency of the exchange rate transmission mechanism of monetary policy improve or not afterwards? And whether will the exchange rate transmission mechanism of monetary policy assist the effectiveness of monetary policy? And these problems are expected to be clear after the reform of the RMB exchange rate.This essay introduces the conclusion of exchange rate's influence on monetary policy both At home and abroad at its beginning. And it explains the process of the exchange rate transmission mechanism of monetary policy playing role in the real economy. And on the basis of this theory, the author tests whether all the links of the exchange rate transmission mechanism of monetary policy go smoothly. It is discovered through the author's empirical analysis that monetary policy's influence on exchange rate and exchange rate's influence on the real economy are comparatively obvious in the long run, which proves that reform of the RMB exchange rate ameliorates the environment where the exchange rate transmission mechanism of monetary policy works. In the short run, interest rate and money supply have no effective influence on exchange rate, and the central bank will have no obvious effect instantly if it employs monetary policy and interest rate to regulate exchange rate. And because exchange rate is the cause of the change of money supply, and thus, tight monetary policy's effect on regulating the real economy is weakened. That monetary policy fails to have effect on exchange rate is due to non-market-oriented interest rate, restrictions on the free movement of capital, compulsory exchange settlement system and so on. In the process of exchange rate's influence on the real economy, exchange rate has instant influence on net exports, and the decline of net exports is caused by the appreciation of the RMB, which impacts the real economy.At the end of the essay, the author makes a conclusion on why the effect of our country's exchange rate transmission mechanism of monetary policy is weak, and makes some suggestions on how to dredge our country's the exchange rate transmission mechanism of monetary policy.