A Study On The Relationship Between Rmb/Usd Exchange Rate Fluctuation And Sino-US Cross-Border Short-Term Capital Flow

Recently,China’s continuous opening-up and liberalization policies in the financial sector have promoted the improvement of market-oriented interest rate and exchange rate mechanisms,the enhancement of the international status of the RMB and the increase of financial sector dividends.In the post-pandemic period,as the economy slowly recovered,the dollar generally appreciated against the renminbi,but during this period,the appreciation and depreciation reversed and the fluctuations became increasingly bilateral.In addition,countries began to implement quantitative monetary policies,steadily approaching the zero lower bound,which led to a sharp increase in global liquidity.Emerging market economies are faced with great pressure of cross-border capital flow,and cross-border capital flow presents abnormal flow,which also brings challenges to China’s cross-border capital flow management.In view of the above background,this paper mainly studies whether there is a correlation between China’s exchange rate fluctuations and cross-border capital flows.First of all,the introduction of this paper presents the research on the correlation between exchange rate fluctuations and cross-border capital flows by domestic and foreign scholars through literature review at home and abroad,and focuses on the one-way impact of exchange rate fluctuations on cross-border capital flows or cross-border capital flows on exchange rate fluctuations,trying to study the relationship by empirical analysis.In addition,most studies only make qualitative analysis on the interaction and influencing factors between exchange rate fluctuations and capital flows,but lack mechanism test from an empirical perspective.Only by in-depth analysis of the transmission path of their interaction can we have more accurate thinking and judgment on the problems and countermeasures,which is also an indispensable part.Secondly,this paper defines exchange rate fluctuations and cross-border capital flows,and then introduces the exchange rate overshoot theory,interest rate parity theory and the interaction mechanism between exchange rate fluctuations and cross-border capital flows,thus laying the theoretical basis for this paper.In order to study the correlation between shortterm cross-border capital flows and RMB exchange rate fluctuations,Granger causality test,impulse response function and variance decomposition are carried out based on VAR model,which indicates that there is a certain correlation between RMB exchange rate fluctuations against US dollar and short-term cross-border capital flows.Then the intermediate effect model is used to test the transmission mechanism of the relationship between exchange rate fluctuations and cross-border capital flows.Through a series of theoretical and empirical studies,this paper draws the following conclusions: the two-way volatility of cross-border capital flows has intensified,the volatility of RMB exchange rate is in a long stage of appreciation cycle,and there is a certain correlation between short-term cross-border capital flows and RMB exchange rate fluctuations.At the same time,the mechanism test proves that inflation and interest rate spread play an intermediary role in cross-border capital flows and exchange rate fluctuations.Based on the above conclusions,this paper puts forward suggestions that China should control the fluctuation range of exchange rate,strengthen the supervision of cross-border capital flow and expand the financial opening up.