Research On The Effect Of Reversal Of Foreign Exchange On The Regulation Of Money Market Interest Rates

Foreign exchange has been increasing for double surplus of balance of payments. To maintain exchange rate stable. The central bank takes sterilization policies, which leads to the differences in the effect of different targets. The amount of money has been economical and effective and exchange rate has been stable. While the Interest rate adjustment mechanism has been limited. We will analysis the regulation ability of the policy rate to the market rate of interest, and the market rate of interest to the entity economy. With the propulsion of the marketization of interest rate, the block between the policy rate and the market rate of interest is existing. The same is to the market rate of interest and the entity economy.This article summarizes the foreign exchange formation mechanism theory, and analysis the characteristics of reversal of foreign exchange mechanism. We find that the rapid growth in the size of foreign exchange and drastic changes in the structure of sources were main features by 2015. We card the rate regulation development theory and process which includes interest rate regulation theory proposed by Wicksell, Keynes, Tobin and Taylor. Then the paper recalls the history of China interest rate change control policies, analysis the contribution of Chinese Interest Rate Adjustment Practice to Interest Rate Adjustment Theories. According to the theoretical foundation and in the Chinese context of the current economic and financial changes. Exploring the mechanism how foreign exchange write-off influences China's interest rate control policies.Based on the theory. The article describes the size and the structure of China's foreign exchange's growth, studys the effects of foreign exchange sterilization policies. We put 2010 as the cut-off point range. Variance comparison method will be taken to analysis the effect of monetary policy to M2, exchange rate and interest rate regulation. On the basis of exploration of the mechanism of reversal of foreign on exchange control policies, analysing the effects of the regulation.Finally, based on the current situation presented, This paper selects 8 indicators which reflect foreign exchange, the central bank monetary policy, market interest rates and the real economy factors, including foreign exchange (WZK), M2, commercial release rate (YP), the benchmark one-year deposit interest rate (DC), interbank lending rate (30 days) (YCJ), the inter-bank bond pledged repo rate (30 days) (YZG), total credit (XD) and fixed investment (GDT). Takes 2010 as a sample node, analyze of the financial mechanism of the effect of Reversal of foreign exchange on China's monetary policy regulation of money market interest rates before and after the crisis. Proposes appropriate policies recommendations based on empirical conclusions.