Exchange Rates,Exchange Rate Expectations And RMB Internationalization:International Experience And Empirical Studies

As China’s economic strength continues to increase and the international status has a significant increase,the RMB is used more and more widely as an international settlement currency,and even becomes the international reserve currency of a number of countries.The process of internationalization of RMB has accelerated significantly,but it is accompanied by many problems.In the process of internationalization of RMB,exchange rate control will gradually liberalize,which will have a certain degree of impact on China’s exchange rates.At the same time,the gradual liberalization of capital account will make the result that the risk from influence of RMB assets held by foreign investors will also gradually increase,and foreign RMB assets demand is very sensitive to the fluctuation of the RMB exchange rate expectation,and the fluctuation of the RMB exchange rate expectation will have a direct impact on capital transactions and foreign demand for RMB assets,and thus will have an impact on the internationalization of the RMB.It can be seen that there is a mutual relationship between the RMB internationalization and the RMB exchange rate and the exchange rate expectation.Based on this,this paper makes a theoretical and empirical analysis of the relationship between the RMB internationalization and the RMB exchange rate and the exchange rate expectation,and tries to explore the transmission mechanism in the economic market of the exchange rate and the exchange rate expectation,as well as their long-term and short-term relationships with the internationalization of the RMB,so that,in the process of continuous liberalization of exchange rate control and capital account,the internationalization of RMB can proceed smoothly.In this paper,the combination of theoretical research and empirical research,qualitative research and quantitative research is used to discuss the related issues of RMB exchange rates,exchange rate expectations and RMB internationalization.First of all,this paper combines the status quo through searching and reading the relevant literature at home and abroad.And then,this paper examines the internationalization of the dollar,the German mark and the yen as well as the changes in the exchange rate during the internationalization process,providing international experience for the internationalization of the RMB,and then briefly summarizes the key events in the process of RMB internationalization and the changes of RMB exchange rate,and analyzes the advantages and disadvantages of RMB internationalization.Also,this paper analyzes the possible influencing factors of foreign RMB demand according to classical money demand theory and monetary substitution theory.Before conducting empirical research,this paper makes a theoretical study on the mutual influence mechanism between RMB exchange rates,exchange rate expectations and internationalization of RMB as the theoretical basis of empirical research.On the basis of this,the paper constructs a vector autoregressive(VAR)model to test the relationship between RMB exchange rates,exchange rate expectations and RMB internationalization,analyzing the long-term relationship between RMB exchange rates,exchange rate expectations and RMB internationalization,as well as short-term influence characteristics and the causal relationship between each other based on empirical results.Finally,the paper summarizes the whole paper,and puts forward practical and effective policy suggestions in order to better realize the RMB internationalization as well as maintain the RMB exchange rate reasonable and stable.The empirical results show that there is a long-term equilibrium relationship between the RMB exchange rate,the RMB exchange rate expectation and the internationalization of the RMB.And there is no granger causality between the RMB internationalization and the RMB exchange rate,but the RMB internationalization and the RMB exchange rate expectation are Inter-Granger causality.For the changes in the degree of the internationalization of the RMB,the RMB exchange rate expectation is expected to respond more quickly than the RMB exchange rate.The RMB exchange rate expectation is expected to be the granger reason for the RMB exchange rate,and the RMB exchange rate responds very rapidly and has been increasing towards the changes in the RMB exchange rate expectation.The impact of the RMB exchange rate expectation on the internationalization of the RMB is realized by first influencing the RMB exchange rate and then influencing the RMB internationalization through the RMB exchange rate.The response of the RMB internationalization to the changes of the RMB exchange rate expectation is very weak,but strong to the changes of the RMB exchange rate.The RMB exchange rate contributes the most to the fluctuation of the RMB internationalization.