The Study On The Impact Of Exchange Rate Volatility On Economic Growth

The choice of exchange rate regime is one of the most controversial factors in macroeconomic policy.The coexistence of two extreme exchange rate regimes in today's world is one of the reasons for its controversy.China has always used a fixed exchange rate system until 1994 when it was changed to a managed floating exchange rate;South Africa has been using a volatile exchange rate system.Therefore,the choice of exchange rate system needs research.In recent research,it is extremely important to study the impact of exchange rate volatility on economic growth,especially from the perspective of financial openness.The exchange rate system and financial openness have become the two most important factors influencing the contemporary economy.The political system formed under these two systems affects a country's economic growth.After the world economy experienced the subprime mortgage crisis in the United States and the Brexit event,the world economy was in a period of gradual recovery.However,in 2018,the Sino-US trade war broke out,and its intensity was unprecedented,which once again caused a certain degree of impact on the economy.Therefore,studying the choice of exchange rate system and the choice of financial openness are of great significance to economic growth.Firstly,this paper divides the process and current situation of the exchange rate system and the financial openness into two index,namely,the de jure and the de facto classfication,at the international and domestic levels,compares both of international and domestic financial openness.Secondly,it expounds the relevant theoretical model and illustrates the transmission mechanism of the exchange rate system and the impact of financial openness on economic growth.thirdly,using the random effects model to research the unbalanced panel data of annual data of 90 countries in the world from 1985 to 2017.At the same time,we have grouped countries with different temporal and per capita GDP levels to discuss the robustness of empirical results.The endogeneity of the results was tested using the dynamic panel GMM method.Finally,we give the empirical results of this paper,and give policy recommendations at two stage,international and domestic.Through empirical research,this paper draws the following conclusions: exchange rate volatility have a negative impact on economic growth,and financial openness has a positive impact on economic growth.Combining exchange rate volatility with financial openness to consider their intersections,we find that the intersections also has a positive impact on economic growth.Based on the conclusions,this paper puts forward some suggestions: Firstly,on the international stage: the country should strengthen exchange rate cooperation to avoid competitive currency depreciation;at the same time,they should resist trade protectionism together;To China's proposal,give a policy aimed at China's current situation and suit China's national conditions.Recommendations and guidelines.Firstly,we will steadily expand the financial open system and further reduce foreign exchange controls.Secondly,steadily realize the linkage effect of exchange rate and interest rate,and spontaneously regulate the excessive flow of capital.Thirdly,improve the financial system and establish an effective financial regulatory system.Fourth,a firm opposition to trade protectionism and opening up to promote development.