Research On The Impact Of The Fed's Monetary Policy On The RMB Exchange Rate

The issue of RMB exchange rate has always been a hot topic in international finance,and it is also an important factor that China has to consider in promoting the internationalization of RMB.In July 2005,China reformed the RMB exchange rate system.With reference to a basket of selected currencies,China implemented a managed floating exchange rate system based on market supply and demand.In August 2015,the central bank expanded the scope of China’s exchange rate market reform and formally began to reform the intermediate quotation mechanism for exchange rates.Market makers provided the middle price quotation to China foreign exchange trading center with reference to the closing exchange rate of the inter-bank foreign exchange market last day.This reform made a more market-oriented RMB exchange rate and improved the fluctuation of RMB exchange rate.The reform of the exchange rate system reflects China’s determination to further deepen the opening up policy and strive to promote the internationalization of the RMB.It also brings challenges to the stability of the RMB exchange rate and the external environment.The fluctuation of the RMB exchange rate has increased significantly,and the impact of the external environment has been increasing.Empirical data show that the adjustment of the Federal Reserve’s monetary policy will significantly affect international capital flows,resulting in large fluctuations in the exchange rate of emerging market countries.China has become the world’s second-largest economy,the world’s second largest investor,and has huge foreign exchange reserves.However,in the face of the news of global capital return,international capital failure of China’s economy and international hot money short of RMB brought by the Fed’s interest rate increase,the Chinese government is facing many challenges in further deepening the reform of financial and foreign exchange management system.In this situation,to explore the specific ways of the impact of the monetary policy of the Federal Reserve on the RMB exchange rate,and to compare the impact on the monetary policy of the Federal Reserve before and after the reform of the RMB exchange rate system is conducive to promoting the reform of the exchange rate system more steadily,in order to deal with the potential external risks.This paper first comprehensively analyzes and summarizes the existing research in related fields,combining the exchange rate theory and the historical data of relevant variables,and analyzes the main influencing factors of RMB exchange rate from two aspects of theory and experience.Based on the VEC model and empirical analysis,the monetary policy of the Federal Reserve is divided into two periods: the easing period from July 2008 to October 2015 and the interest rate raising period from November 2015 to August 2019.The changes of the main factors of RMB exchange rate fluctuation and the differences of the influence of US monetary policy on RMB exchange rate are compared.The empirical results show that after the "811" exchange rate reform,the long-term and short-term effects of the monetary policy of the Federal Reserve on the RMB exchange rate have changed.At the same time,due to the complex international economic situation,the impact of market expectations on the RMB exchange rate has also been significantly strengthened.