The Sequence Of China's Financial Reform Aimed At Macroeconomic Stability

Interest rate liberalization,the reform of exchange rate system and the opening of capital account are important contents of China's financial reform and opening up.How to make proper arrangements for the above three reforms is an issue that has been debated for a long time.This paper theoretically analyzes the interaction between interest rate,exchange rate and international capital flow.Furthermore,this paper analyzes the effects of interest rate liberalization,exchange rate system reform and capital account opening and its macroeconomic stability by using the parametric vector auto-regressive model of three variables and four variables.The empirical results show that: the promotion of capital account opening will significantly enhance the interest rate,exchange rate and short-term capital flow interaction;Due to the existence of policy control,RMB exchange rate fluctuation cannot be fully transmitted to interest rate,which also makes the response of interest rate to exchange rate shock appear inter temporal overlap;From the point of view of macroeconomic stability,the impact of exchange rate shocks is the least,and the impact of short-term capital flows is the strongest.From the point of view of macroeconomic growth,the impact of interest rate shocks is the least,while the impact of short-term capital flows is the strongest.It is concluded that in order to avoid systemic financial risk caused by capital flight which is difficult to control and promote economic growth under the premise of maintaining macroeconomic stability,the reform of financial marketization in China should follow this order that Interest rate liberalization and the reform of exchange rate system should be carried out harmoniously,and the opening of capital account should be partly promoted first,but the overall capital opening should be carried out after the reform of Interest rate and exchange rate system.