Researches On The Determination Of Exchange Rate Target Zones

With the development of the economic and financial globalization, it is very important for every country to choose an appropriate exchange rate system. The debt and currency crisis happened in the Latin American countries in the 1980s, the 90's Southeast Asia financial crises, as well as the Argentine's financial crisis all have promulgated that the unsuitable exchange rate system is an important factor to cause currency crisis in the emerging marketability countries. But the choice to choose an exchange rate system for a country mainly depends on the concrete economy and financial situation. Last year, although exchange rate system in our country has realized transformation from solely pegging to US dollar to adjustment according to a basket of currencies, under the pressure of continuous appreciation, this exchange rate system will not adapt to the development of the financial industry in our country in the future. Thus it is very important for us to correctly appraise real exchange rate level in our country and determine the "exchange rate target zones" as the future exchange rate system reform's direction.First, this paper analyzes the exchange rate target zone's connotation, and introduces the modern econometric technology and the mathematical analytical methods, then analyzes the exchange rate system from two aspects to inquires into the exchange rate zone's determination in our country: First, this paper discusses the exchange rate misalignment according to the Renminbi exchange rate discussion in the economic field, then discusses the degree of misalignment if the conditions exist. In order to solve these two questions, this paper has carried out the cointegration technology, the error correction model and the H-P filter method to analyze the above questions more deeply. This paper has highlighted the importance of the exchange rate target zone theory in our country's reform, and affirms the suitability of target zone's system in our country's reform in the future, and tells us how to calculate the equilibrium exchange rate level after the implementation of exchange rate target zone clearly, and how to determine the exchange rate target zone's band and other important questions.