Research On The Relationship Between RMB Interest Rate And Exchange Rate In The Process Of Market-oriented Reform

The internal money market and the international money market will mix together when the finance market is open.The relationship between interest rate and exchange rate affects the market work,influencing economy and finance development. Accompanying with market-oriented reform,the linkage between RMB interest rate and exchange rate will become more and more obvious.Therefore,for promoting healthy development of economy and harmony of monetary policy in the process of market-oriented reform,researching on the relationship between interest rate and RMB exchange rate is so meaningful.Based on the reality of market-based reform in our country,this paper employs theoretical analysis from four aspects,which are balance of payments,capital arbitrage,marketplace equilibrium and price viscidity.And it inspects the realistic performance of RMB interest rate and exchange rate mechanism in the process of putting monetary policy into practice,so the condition of the linkage of RMB interest rate and exchange rate can be found out when it analyzes the effect of monetary policy operation.About the empirical approach,from the long-run aspect,it analyzes the equilibrium relationship between interest rate and exchange rate by building RMB behavioral equilibrium exchange rate model.Moreover,based on the cointegration equation,Vector Error Correction model is built to analyze the short-run linkage of these variables.According to the results,the equilibrium relationship between RMB interest rate and exchange rate exists in the long term,but in the short term,the relationship between RMB interest rate and exchange rate isn't obvious.The reasons of the existing realistic linkage mainly are the low market-oriented degree and government intervention.Because of system restraint and policy target influence in our country,government takes some steps to tighten up necessary administration intervention and macroscopic control to adjust and lend the national economy.The behavior and measures from government destroy market-oriented mechanism to some extent,and the operation of linkage of interest rate and exchange rate is hindered, whether in the realistic economy market or in the monetary policy system.All of these are consistent with the situation of system in the background of market-oriented reform in our country at present.Therefore,the paper seeks some effective measures to promote perfecting linkage mechanism of RMB interest rate and exchange rate, including steadily promoting interest rate marketization,gradually pushing forward capital account liberalization,developing market-oriented exchange rate formation mechanism,reinforcing harmony of market-oriented reform and perfecting outside marketplace environment.They will optimize linkage mechanism of RMB interest rate and exchange rate,which makes sure market-oriented reform in our country will go on very well.The main characteristics of the paper is that it analyzes the relationship between interest rate and exchange rate from the long-run equilibrium aspect,and it inspects the realistic performance of the interest rate and exchange rate mechanism in the process of putting monetary policy into practice,which has active and practical significance.