A Study On Expectation Formation Mechanism Of Renminbi Exchange Rate

Expectation is the prediction or estimation of future economic variables made by economic agents,and it is the psychological activity of market participants.At different stages of China’s economic operation,the effects of various economic factors on RMB exchange rate expectations are constantly changing.Accurate understanding of the public’s exchange rate expectations,grasp the exchange rate expectations are very difficult.After the "8.11" exchange rate reform in 2015,the degree of marketization of the RMB exchange rate has been further improved,and the market expectations have enhanced the guiding role in determining and changing the RMB exchange rate.In the new stage of RMB exchange rate marketization reform,the key to stabilizing RMB exchange rate,managing exchange rate expectation and avoiding financial crisis will be to clarify the formation mechanism of RMB exchange rate expectation,and explore ways to improve expectation and disperse expectation.Based on theory and relevant literature,this paper establishes the RMB exchange rate expectation formation mechanism model,and explores the formation mechanism of RMB exchange rate expectation.It is based on the theoretical model of currency crisis and the typical facts in the process of RMB exchange rate expectation formation.This paper selects the data of RMB exchange rate expectation from April 2012 to March 2018 in both offshore and onshore markets to measure the RMB exchange rate expectation.The empirical study uses factor analysis to classify the influencing factors of RMB exchange rate expectation,and explores the influencing factors of RMB exchange rate expectation formation and change in different periods.The main conclusion of this paper is that the influencing factors of RMB exchange rate expectation from April 2012 to March 2018 include domestic economic fundamentals,external economic situation,balance of payments,inflation,capital flow and policy factors.At each time point,the factors that affect the expectation of appreciation and depreciation will exist,and change with the economic situation,and the expectation of RMB exchange rate changes in a pro-cyclical manner.The strong domestic economic fundamentals tend to form appreciation expectations,while the worsening external economic situation tends to form depreciation expectations.Apart from six kinds of factors,RMB exchange rate expectations are significantly influenced by themselves,and have the characteristics of self-realization and self-strengthening.It shows that the types of participants in China’s foreign exchange market are single,and the similarity of market participants in information screening is an important reason for the formation of unilateral expectations.In the future,only by adhering to the market-oriented reform of RMB exchange rate,enriching the types of market participants,strengthening the government’s credibility and gradually improving the domestic financial system,can we effectively improve exchange rate expectations,differentiate exchange rate expectations,prevent the formation of unilateral expectations,and achieve exchange rate stability.