Research On The Impact Mechanism Of RMB Exchange Rate Fluctuations On The Economy

With the continuous development and improvement of the RMB exchange rate formation mechanism,it is of great significance to study the impact of exchange rate fluctuations on the economy in creating a new pattern of domestic and international "double cycle" development.With the implementation of the strategy of building a new development pattern of domestic and international "double circulation",the economic development relationship between China and the world will become closer.As a financial variable,the exchange rate is an important link between a country’s economy and foreign economies,therefore,the impact of exchange rate fluctuations on economic growth has naturally become a hot topic in the field of financial research at home and abroad,and with the increasingly close connection between China and the world economy,China’s exchange rate system is constantly changing,in this context,it is particularly necessary to study the impact of exchange rate fluctuations on the economy,the influence channels and the degree of impact.In this paper,a combination of economic theory and econometric methods is used to analyze the transmission mechanism of the impact of RMB exchange rate fluctuations on the economy.At the level of economic theory,the influencing factors of exchange rate fluctuations are expounded,and the transmission mechanism of the impact of RMB exchange rate fluctuations on the economy is analyzed from the price channels,import and export trade channels,foreign direct investment channels,capital market channels,and financial channels.At the econometric approach level,the monthly data from August 2005 to December 2020 were used for empirical analysis,and the IGARCH model was used to measure the exchange rate fluctuation sequence After that,the TVP-VAR model was used to analyze the effect of exchange rate fluctuations on the economy under the above five paths.The main conclusions of this paper are as follows:(1)Among the several paths in which exchange rate fluctuations affect the economy,RMB exchange rate fluctuations have the greatest impact on economic growth through import and export trade channels,followed by price channels,foreign direct investment channels and capital market channels,and the financial channels have the least impact.(2)Among the several influencing paths,the direction of the impact of RMB exchange rate fluctuations on the economy through price channels is positive,the direction of influence of capital market channels is negative,and the direction of influence of import and export trade channels,foreign direct investment channels and financial channels is uncertain.(3)The impact of exchange rate fluctuations on the economy through different transmission channels is dynamic,and the variation in different sample ranges is obvious.Finally,through theoretical and quantitative empirical analysis,corresponding policy suggestions are put forward from the aspects of exchange rate system reform,financial market reform,strengthening international liquid capital supervision,and developing and improving the structure of foreign trade,so as to provide a certain reference for national economic policy formulation.