An Analysis Of The Memory Effect Of RMB Exchange Rate Under The Trend Of Two-way Fluctuation

With the increasing international status, the share of the RMB in the foreign exchange market is also getting higher and higher. On December 1,2015, the International Monetary Fund announced that the RMB will be formally incorporated into the currencies basket of the special drawing rights (SDRs) on October 1,2016. And then the SDR basket will correspondingly expand to contain the USD, EUR, RMB, JPY and GBP, and the weight of the RMB in the currency basket of SDR will be 10.92% which more than then JPY and GBP, ranking the third. In the history of the development of the International Monetary Fund, the RMB joining the SDR will chalk up a record of that the currencies of emerging economies was incorporated into the SDR first time. This reflects that the recognition of the international financial system to China’s economic and financial global influence and the process of the RMB’s internationalization. But on the other hand, this also means that the RMB exchange rate will become a more complex international issue, and become the focus of attention of the global financial market once again. Now the two-way fluctuation trend of the RMB exchange rate is obvious, under the trend, examining whether the RMB exchange rate has the memory effect and the memory effect how to change is significant to preventing and controlling the risk of exchange rate and deepening the reform of the RMB exchange rate.Firstly, the paper analyze the current situation of the RMB exchange rate market from tree aspects of the choice of the exchange rate regime, the trend of exchange rate and the influence factors of exchange rate fluctuation through the qualitative analysis method. And the result shows that the two-way fluctuation trend of the RMB exchange rate is obvious in the exchange rate regime of based the current market supply and demand, managed floating exchange rate.Secondly, this paper uses vector auto regression model to analyze whether the RMB exchange rate has the memory effect, and makes a longitudinal comparative of different stages of memory effect. In addition, this paper also carries out a horizontal comparative analysis of the memory effect of the forging currencies exchange rate in the SDR. The results show that whether in the situation of unilateral appreciation of the RMB exchange rate, or in the context of two-way fluctuations of the RMB exchange rate, the memory effects of the RMB exchange rate sequence are significant. And the memory effect is divided into short memory and long memory, the direction of short memory is often shown as "inertia", while the direction of long memory is often performance as "reverse". Now the long memory effect of RMB exchange rate is stronger than the short. It’s found that the memory effect of the RMB exchange rate decline by the longitudinal compassion, because the average memory cycle is being elongated. Meanwhile, the horizontal comparison finds that the JPY to RMB and GBP to RMB exchange rates’ short memory effect are stronger than the USD to RMB.Finally, this paper analyses the problems of two-way fluctuation trend and the memory effects of the RMB exchange rate. On the basis, the paper puts forward policy recommendations of deepening the reform of the RMB exchange rate system from the perspectives as follows:middle price management, currency basket optimization, market participants’autonomy and the exchange rate risk prevention and control.