| In 1994’s reform of the RMB exchange rate mechanism, the RMB official exchange rate and market exchange rates, adopted a single and managed floating exchange rate regime based on market supply and demand. In July 21 of 2005, China improve RMB exchange rate formation mechanism reform once again. The RMB exchange rate based on market supply and demand, with reference to a basket of currencies, a managed floating exchange rate system. At the beginning of 2012, the RMB exchange rate enter into the two-way floating flexible exchange rate period. The goal of how explicit exchange rate intervention in the exchange rate regime and the measure of the effectiveness of foreign exchange intervention has become a basis for decisions of the central bank, and also has important theoretical and practical significance.In this paper, we use econometrics to study foreign exchange intervention objectives and the effectiveness of sterilized intervention with the measurement of segment of in December 1998 to December 2011. The paper first gives an overview of foreign exchange intervention and foreign exchange intervention conduction theory review. Then have an empirical analysis of China’s foreign exchange intervention objectives, and use the portfolio balance theory on the basis of the risk premium model to study the proportion of portfolio and exchange rate risk premium.The results show that the central bank’s foreign exchange intervention objectives is obviously a headwind to the intervention characteristics. And the central bank is inclined to intervene.The intervention does not have a clear asymmetry in the appreciation of the RMB. RMB assets and foreign currency assets has not completely alternative. Section of the sample data results are displayed in the dollar peg and pegged to a basket of currencies this two exchange rate regime, sterilized intervention can influence exchange rate through the portfolio channel of exchange rate. |
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