Research On Monetary Policy Effectiveness Under The Background Of The Internationalisation Of The RMB

The RMB internationalization is not only the inevitable result of China's economic strength, but also the inevitable choice of our peaceful development. At present, the internationalization of the RMB has achieved initial success. There is no doubt that the internationalization of the RMB can bring seigniorage, increase our power of discourse in the world economy and many other benefits. Meanwhile, we may noticed at the same time, the internationalization of the RMB caused certain impact on China's macro economy system, affecting the effectiveness of China's monetary policy. The purpose of this paper is to study the effects of RMB internationalization on economic various variables and monetary policy transmission mechanism in China, and to make recommendations on the formulation and implementation of monetary policy in China.Combining theoretical analysis and empirical research, this paper firstly summarized the theoretical foundation of the currency internationalization effects on monetary policy effectiveness, then analysis in what way that currency internationalization would influences the every aspects of the transmission mechanism of monetary policy, and latter construct the index of the RMB internationalization(CI), and finally use VAR model empirical analysis the effectiveness of interest rate transmission mechanism and exchange rate transmission mechanism. By constructing the index of RMB internationalization(CI), we can easily found out that the internationalization of the RMB is rapidly developing, but still within the initial stage and need to promote. This paper takes the year 2010 as the watershed of the internationalization of the RMB, using VAR model to compare the effectiveness of monetary policy transmission mechanism before and after that point.According to the empirical results, the negative impact of RMB internationalization on China's economy includes the increasing amount of money supply, the pressure on inflation, the appreciation of the RMB and so on. On China's monetary policy transmission mechanism, the internationalization of RMB weakened the effectiveness of the interest rate transmission mechanism, meanwhile effectiveness of the exchange rate mechanism is more and more obvious. According to the empirical results, China should keep the domestic money supply stable, perfect the monitoring and prediction system of monetary aggregates, and further accelerate market-oriented interest ratereform, maintain the long-term stability of the exchange rate fluctuations and short-term fluctuations in combination, change from the original interest rate transmission channel to exchange rate transmission channel, promote the healthy development of the financial market.