The Study On The Mechanism Of China's RMB Exchange Rate Response To External Shocks

In a country's economic development,the role of the exchange rate is very important.In the national economic affairs with other countries foreign exchange rate is also of great significance.As the connection between the countries all over the world becomes more tightly,the possibility of countries hit by external shocks also increases gradually.RMB exchange rate is an important bridge between China and the world economy,and the external impact is the problem that China must face to realize its sustainable economic development.Exploring the mechanism of RMB exchange rate coping with external shock is of great significance to the formulation of China's exchange rate policy and the steady development of economy and societyIn this paper,the definition of external shocks is defined,and the literature about the impact of RMB exchange rate on external economic shocks at home and abroad is combed.I found that the existing literatures adopt SVAR analysis model and related research,that is to say in the vector space directly applying the constraint conditions for analysis and research,will cause different degrees of neglect of the long-term co-integration relationship between variables.That is,if there is a co-integration relationship between variables,the average value of the VAR model will be set incorrectly,which can affect the correct analysis of the causes of exchange rate fluctuations to a great extent.In order to avoid the corresponding mistakes,this paper makes corresponding improvements.In this article,through combing the two model of external shocks and exchange rate determination model,select the RMB exchange rate against the dollar,the output,the inflation rate,the interest rate as variable vector regression model was constructed.Of unit root test and co-integration test,vector error correction model to structure estimate the long-term co-integration relationship between variables,and through the variance decomposition method to identify sources of different period of the RMB exchange rate fluctuations.The results show that the RMB exchange rate can play a buffer role in deal with external shocks,but the effect is limited.In different periods,a key source of fluctuations of RMB real exchange rate against the dollar.