Impact Of Cross-border Trade Settlement In RMB On RMB Exchange Rate Expectation Based On VAR Model

With the continuous development of China’s cross-border trade RMB settlement business over the past decade,the proportion of RMB settlement in China’s foreign trade activities is increasing.However,with the expansion of the global use of RMB,the factors affecting the exchange rate change increased,and the fluctuation margin of RMB exchange rate also wider.Companies usually take measures to avoid losses from possible exchange rate changes in advance,which in turn encourages exchange rate expectations to become self-fulfilling.Exchange rate expectation is not only selffulfilling,but also may lead to the rapid inflow and outflow of speculative capital,resulting in a series of chain reactions such as changes in money supply and asset price bubbles,threatening China’s financial stability.So exchange rate risk management is fundamentally exchange rate expectation management.Only by breaking through the existing international monetary system can we fundamentally change the expected convergence of exchange rates.On the basis of the booming development of RMB settlement in cross-border trade,how to better guide and manage exchange rate expectations and help the globalization of RMB is the issue of great concern to China’s monetary authorities.First of all,through literature analysis,this paper read and study the relevant domestic and abroad articles on exchange rate expectation,and comprehend the existing research results and main viewpoints of scholars on it.Then,through expounding the development of exchange rate expectation theory history and analysing the change mechanism of exchange rate expectation,get the appropriate explanatory variables and control variables.And using the official data during 2012-2020 years of RMB crossborder trade settlement and the related domestic economic variables,to analysis these factors’ impact on exchange rate expectations through the VAR model.The empirical results show that RMB settlement of cross-border trade is the granger factor of exchange rate expectation and is negatively correlated with it.Exchange rate is the Granger factor of exchange rate expectation among control variables.Interest rate,foreign exchange reserve and money supply have no significant effect on RMB exchange rate expectation.The robustness tests were carried out by shortening the sample year and controlling other influencing factors.The results obtained were consistent with the conclusion of VAR model,indicating that the empirical results were robust.Finally,this paper summarizes the whole paper and puts forward policy suggestions to further improve the exchange rate formation mechanism,accelerate the upgrading of industrial structure,establish an effective cross-border trade settlement monitoring system,and strengthen the exchange rate expectation management.