The Analysis Of China’s Foreign Exchange Market Pressure And Monetary Policy

The economic growth rate of our country in2012and2012was7.8%and7.7%，thespeed of our economic growth began to slow down.At the same time, the CPI has antrend in2014,the CPI of April and May was1.8%and2.5%. The registered urbanunemployment rate in2013was3.14%, increased0.96percent compared with2012. Inbalance of international payment,current account balance was540billion dollars in2013, but this was430billion in2012. Double surplus between the current accountand capital projects leads to the high speed growth of foreign exchange reserve., whichwill make RMB facing the pressure appreciation in foreign exchange market. Thegovernment wants to decease the foreign exchange reserve, they should stimulatecustomer demand by loose monetary and fiscal policies. But loose monetary and fiscalpolicies may increase inflation. so, there have a contradiction between economicnatural and policy goals. so, I choose this title to study which have economic andpractical significance.Reading a lot of literatures,I find that the calculations of the exchange market pressureactually esmiate the imbalance degree of internal or external economic development inone country. Under the guidance of external equilibrium theory, the author establisheda VAR model with respect to exchange market pressures and domestic interest rates,domestic credit, the level of economic development, the price level. The authoranalyzes the status quo of China’s foreign exchange market pressures and lack ofmonetary policy. drawing on the basis of outstanding and successful theory ofmonetary policy on foreign cases, the author find the causes of China’s foreignexchange market pressure. The author eventually find the solution of release China’sforeign exchange market pressure. Model results show that there is a very goodrelationship between domestic interest rates and foreign exchange market pressure.However, the interaction of the presence of asymmetry of domestic credit, the level ofeconomic development economic development and the foreign exchange marketpressure have the presence of asymmetry. Meanwhile, the estimate of foreign exchange market pressure show that the expansion of foreign exchange reserves have agreat impact on the foreign exchange market pressures. According to the analysisresults of the model, I found that looking for a suitable monetary policy to adjust thepressure in the foreign exchange market is very complex thing, so we must fullyconsider all of the above reaction to monetary economic variables measured.To study the interaction between monetary policy and exchange market pressure,theaythor established the model.. Through consolidation of the literature development, Ifind many researchers focused on one policy variable of mutual relations and theforeign exchange market pressures. For example, the study of Gochoco-Bautista andBautista focused primarily on interest rates I hope to get a comprehensive understandingof the model, so the domestic credit, domestic interest rates, economic developmentlevel and the price level are added to the model.So breadth of this model has beenextended, but because the author’s research in this area is only a preliminaryunderstanding of the problem of study has not yet reached a certain depth. At the sametime, I did not study the relationship between the monetary policy variables,so I hope toget corrections and suggestions.