Research On Exchange Rate Fluctuations Effects On China’s Liquidity

In recent years, the liquidity problem in China has attracted attention of scholars.Since2003, the appreciation of the RMB exchange rate is expected to double surplusof balance of payments, the foreign exchange reserves are growing rapidly, causingthe problem of excess liquidity has become a prominent problem in China’s economicoperation in a fairly long period of time. Since2012, various factors affected by theexternal environment and the domestic economic situation, our country appeared theliquidity level bidirectional volatility, liquidity problems once again become the focusof attention. The effective management of liquidity in the banking system is thefoundation for central bank to implement monetary policy, liquidity supply anddemand imbalance, will directly affect the effect of monetary policy, and even affectthe balance of total amount of macro economy. So in the new situation, in-depth studyand grasp the basic principle and mechanism of the liquidity management of thecentral bank, has the extremely important theory significance and practicalsignificance to improve the monetary policy is scientific, forward-looking andeffective.This paper starts from the theory of liquidity, first elaborated the measure methodand flow between the three levels and three levels of liquidity, the connotation,elaborated on the basis of the theory of central bank liquidity management, describesthe mobility management mechanism of the liquidity management tool and centralbank liquidity supply, flow demand, China’s. Secondly, based on the present situationand the RMB exchange rate movement in China, analysis of the RMB exchange ratefluctuations convection effect mechanisms, including the international balance ofpayments, the domestic price transmission and open market operations, the effect ofthree path. Then from the empirical stage of the reform in2005before and after thereform of RMB exchange rate and RMB exchange rate volatility on monetaryliquidity and liquidity in the banking system are studied, the variables in the sampleinterval for the long-term cointegration test, Grainger test and impulse responsefunction analysis, establish the vector error correction model. Finally, some policysuggestions on strengthening the management of liquidity, the Central Bank of ChinaRMB exchange rate volatility under the proposed.Empirical research shows that: the RMB exchange rate, RMB exchange ratevolatility and liquidity cointegration between the long-term relationship, the long term,the RMB exchange rate has a positive effect on liquidity, and the RMB exchange ratevolatility liquidity produce negative influence, the RMB appreciation that can lead toexcess liquidity, and the RMB exchange rate fluctuations can ease the excess liquidity.According to the short-term dynamic adjustment model of liquidity, the RMBexchange rate fluctuations in the short term liquidity have positive effects on.Compared before and after the exchange rate reform RMB exchange rate volatility liquidity impact, found that after the reform of RMB exchange rate volatility liquidityimpact deeper. Liquidity comparison of RMB exchange rate volatility on monetaryliquidity and financial institutions, found that the impact on monetary liquidity ismore obvious.