Stable Exchange Rate Mechanism

With the collapse of the Bretton Woods System, International Money Currency System entered into the period of Jamaica System. However, Jamaica System didn't build a new frame of International Currency System. It only admitted formally that all countries had the freedom to change exchange rate. This freedom had resulted in the irregular fluctuation of exchange rate and the Currency Crisis. And after Asian Currency Crisis, some Asian countries began to withdraw from the pegged exchange rate regime and chose the managed exchange rate regime. China also followed them in 2005. Why was this choice popular in the emerging countries? Why did the exchange rate fluctuate irregular in some emerging countries? How to stabilize the exchange rate? These questions will be answered in this paper.At first, we draw a conclusion that the international speculative capital plays a crucial role in the fluctuation of the exchange rate by means of the reasons analysis of the exchange rate fluctuation. Then we focus on the research of the stable mechanisms of exchange rate, which consists of the inner stable mechanism and the outer stable mechanism. The former relates to the choice of the exchange rate regime, and the latter has two means to stabilize the rate, one is the foreign exchange intervention, another is capital regulation. Finally, on the one hand, through the effects analysis of the stable mechanism, we draw a key conclusion that the coordination of the stable mechanisms above is the second-best choice to reduce the fluctuation of the exchange rate in emerging countries. On the other hand, we find some flaws of the stable mechanisms, and give some useful advice to improve them. The improved stable mechanisms can give us a good reference to stabilize RMB rate, which is just our ultimate purpose.This paper has six chapters. They are: the reasons analysis of exchange rate fluctuation, the choice of the exchange rate regime, the direct external stable mechanism, the indirect external stable mechanism, the conclusion of the stable mechanism and its improvement, RMB stability under the managed floating regime.