China's Exchange Rate Regime Choice

The selection of RMB exchange rate system is now and will be one of the.most important issues for our country to carry out economic policies. A proper exchange rate system selection is key to the continuous economic development of our country. By analyzing the two-extreme-end exchange rate system, by learning from the exchange rate systems formation of some developing countries in southeastern Asia and by adapting to current situations of our country, this paper puts forward the idea that the RMB basket exchange rate system is applicable to our country's current economic situations. This paper uses our country's real data, develops RMB basket exchange rate model and work out the simulated exchange rate value of the basket exchange rate system. This paper compares the simulated exchange rate value with our country's current nominal exchange rate vale and draws the conclusion that the basket of currencies exchange system is of advantage.The contents of this paper are as follows,In chapter one, this paper outlines the development of exchange rate system selection, states that the theoretical direction has shifted from the dispute between the fixed exchange rate system and the floating exchange rate system to the dispute between the two-extreme-end exchange rate system and the intermediate exchange rate system, and puts forward the question which of the intermediate exchange rate system and the two-extreme-end exchange rate system is more suitable to our country.In chapter two, this paper learns from the exchange rate formation experience of some developing countries and regions in southeastern Asia and manifests that the fixed exchange rate system of pegging of RMB to USD and the complete floating exchange rate system are both not applicable to our country. The basket of currencies exchange rate system is the direction of our country's exchange ratesystem reforms.In chapter three, this paper constructs a preliminary model of basket of currencies exchange rate pegging system, and explains several basic questions as to the construction of this model.In chapter four, this paper uses our country's real data, constructs the annual and monthly practical model of RMB basket of currencies exchange rate system, and makes out and analyzes the simulated exchange rate value. This paper then puts forward that the basket of currencies exchange rate system not only brings RMB a certain floating range. eases the RMB appreciation and depreciation pressure, but also reduces the fluctuation of RMB to other currencies except of USD, and helps to boost the development of our country's imports and exports trades.In chapter five, this paper concludes the enlightenment from the basket of currencies exchange rate model and points out the improvements needed to be made related to the model.