Under The New Exchange Rate Formation Mechanism, China's Exchange Rate Overshoot And Low-key Phenomenon And Its Formation Mechanism

On August 11,2015,PBOC published The Announcement of The Reform of RMB Exchange Rate Formation Mechanism,reopening the reform of the central parity of RMB exchange rate pricing mechanism.to deepen reforming the RMB exchange rate pricing mechanism.Based on the background of the reform of the exchange rate system,this paper studies the current situation and problems of China 's economy before and after this reform.The purpose of this paper is to study the formation mechanism of the overshooting and below-shooting phenomena.Therefore,after sorting out the theory of various researches,the equilibrium exchange rate theory is selected to work out this case.The results show that there is a large degree RMB underestimation after "811 exchange reform" and below-shooting problem seldom occurs and is very unremarkable if happens.This economic phenomenon occurs by a variety of factors,including the US economic recovery and its interest rate policy,the market depreciation expectations,and the exchange rate market segmentation and linkage.In response to the overshooting,the central bank takes exchange rate policy,foreign exchange intervention and capital control measures.Through the mutual influence and role of these measures,it maintains China's exchange rate market stability and mitigates the devaluation of the currency.But PBOC's excessive intervention leads to the below-shooting phenomenon.Undoubtedly,there is still a long way for the internationalization of the RMB.