The Establishment And Empirical Study Of RMB Financial Effective Exchange Rate Index System

The effective exchange rate index is the weighted-average of exchange rates between one country’s currency and several other countries’ currencies,which can be used to measure the overall movement of that county’s exchange rate.The traditional effective exchange rate from the perspective of trade can measure the overall exchange rate movement of a country’s currency to its trade partners’ currencies and that country’s competitiveness in international trade.With the process of economic globalization,the scale of international capital flow far exceeded the scale of international trade flow,the linkage between international capital flow and exchange rate grows fast.The financial effective exchange rate index from the perspective of capital can provide insights into currency value measurement,it can also serve as reference in investment decision-making and policy-suggestion.This paper explores the theoretical basis and economic significance of traditional effective exchange rate and financial effective exchange rate,compiles and compares the RMB traditional effective exchange rate and RMB financial effective exchange rate,constructs the RMB financial effective exchange rate system,investigates the economic significance of related indexes and then further explores the economic significance of financial effective exchange rate through empirical study,draws the following conclusions:1.The thesis explores the theoretical basis and economic significance of financial nominal effective rate,financial real effective exchange rate and the forward effective exchange rate.The financial nominal effective exchange rate is the nominal effective exchange rate with capital weight,which measures one country’s overall exchange rate movement from the perspective of capital.The theoretical basis of financial real effective exchange rate is the portfolio balance model,which measures the attraction of that country’s asset to foreign investors.The forward effective exchange rate’s theoretical basis is the uncovered interest rate parity theorem.The forward effective exchange rate is the spot estimation of future nominal exchange rate,which can be an indicator to the future movement of nominal effective exchange rate.2.This thesis sets the currency basket composition standard,the capital weight composition standard and several other composition standards of RMB financial effective exchange rate index,compiles the RMB financial nominal effective exchange rate index,RMB.financial real effective exchange rate index and RMB forward effective exchange rate index,analyzes the trend of relevant RMB financial effective exchange rate indexes.3.The thesis compares the relevant indexes,the results indicate that the RMB traditional nominal effective exchange rate and RMB financial effective nominal exchange rate differ significantly,RMB financial nominal effective exchange rate can measure the overall RMB exchange rate movement from a new perspective;the trend of RMB financial real effective exchange rate index and RMB traditional real effective exchange rate index also differ significantly,the traditional real effective exchange rate is not a good indicator of financial asset’s attraction to foreign investors;the fitting degree of RMB forward effective exchange rate’s estimation to RMB financial nominal effective exchange rate and the true value of RMB financial nominal effective rate is relatively high.The RMB forward effective exchange rate can predict the future movement of RMB financial effective exchange rate to a certain degree.4.This thesis further investigates the economic significance of RMB financial effective exchange rate through empirical study,uses the VAR model to analyze the measurement capability of RMB financial real effective exchange rate to the that country asset’s attraction;uses the co-integration and error correction model to investigate the predictive ability of RMB forward effective exchange rate to RMB financial nominal effective exchange rate.In summary,with the deepening RMB exchange rate reform,RMB exchange rate’s marketization degree grows increasingly,RMB financial effective exchange rate index can bring insights into the measurement of RMB currency value and RMB assets’global attraction,contribute to the decision-making process of monetary policy and exchange rate policy.