RMB exchange rate regime fixed or a floating _353 -

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RMB exchange rate regime: fixed or a floating

Abstract face the pressure of RMB appreciation, China should let the current exchange rate, floating exchange rates it; in the longer term and what exchange rate system should be implemented. This article compares the advantages and disadvantages of the two exchange rate system, analyzes the conditions of the exchange rate regime choice and China currently have the above conditions, further analysis on this basis should be made from the long term the exchange rate regime choice. Key words fixed exchange rate floating exchange rate system body】【 recent years, the international demands for yuan appreciation is growing, from the second half of 2002, the Japan Finance Phase Masajuro Shiokawa urged China on various occasions on the RMB exchange rate revaluation. Due to the impact of Chinese exports, a number of European countries also joined the camp for appreciation. Early September of this year, U.S. Treasury Secretary John Snow visited China and attended the APEC Finance Ministers Meeting in Thailand, the debate over the renminbi reached a climax. In fact, the substance of the RMB exchange rate issue is not whether the renminbi should be revalued, that is, whether it's short-term movements, but the RMB exchange rate system should be fixed or floating exchange rate. In other words, the exchange rate level is the final result, the exchange rate formation mechanism is the key. Snow believes that a flexible floating exchange rate system is to ensure economic growth and financial the best choice for stability. So, was it? One or two comparative advantages and disadvantages of exchange rate regime 1. Fixed exchange rate system has the advantage of fixed exchange rate system of fixed exchange rates are more conducive to investors, accounting costs and benefits of their own to form a stable earnings expectations, or that foreign inflows lower risk premium, which is conducive to attracting foreign investment. The adverse effects of a fixed exchange rate system, on the one hand can not be flexible and reflect the foreign exchange supply and demand, the exchange rate loss or weakening of the market; exchange rate loss or weakening of the market and it can not adjust the foreign exchange supply and demand, in turn, automatically adjusting function greatly reduced, and thus only by government regulation. However, the shortcomings of the Government to determine the exchange rate is very clear: First, by subjective effects of government regulation is not strong if there will be a major mistake; the second is subject to the constraints of objective factors, changes in exchange rate determination and the interests of all parties involved, the Government had fully consideration; third is subject to the constraints of different policy objectives,[link widoczny dla zalogowanych], the exchange rate objectives may conflict with other objectives, if the exchange rate out of line to a considerable extent it may cause serious financial crisis. On the other hand, Because if the fixed exchange rate system and free flow of capital to take tight monetary policy, interest rates will rise in the exchange rate unchanged, a result of rising interest rates, the increase in investment income on its own, a large number of foreign capital will flow, resulting in local currency upward pressure, in order to maintain the fixed exchange rate level, the government should sell the currency to buy foreign currency intervention, so that monetary tightening has been expanded, monetary policy is ineffective. Therefore, under the premise of free movement of capital, adhere to a fixed exchange rate would give monetary policy autonomy, independence and effectiveness. In the history of our country and the world, the fixed exchange rate system have played an active role in it. Bretton Woods system after World War II, its essence is a fixed exchange rate system, the post-war national economic recovery and establish a stable economic and trade ties, played an indelible role. From our previous situation, there is no free flow of capital through the government can adjust the balance of international payments in general, a fixed exchange rate system more good than harm. The rapid development of Asian countries, 90 years, a fixed exchange rate system to stabilize investor expectations have played a big role. But if the economic bubble, economic slowdown, the trade deficit increased, the impact of speculative capital situation, when the adverse effects of a fixed exchange rate system to well beyond its favorable aspects. 2. Floating exchange rate floating exchange rate system can overcome the lack of a fixed exchange rate system, on the one hand, it can reflect a flexible foreign exchange supply and demand, the exchange rate more market-oriented, which in turn automatically adjusts the foreign exchange supply and demand; other On the one hand, floating exchange rate does not exist, However, the floating exchange rate system is not conducive to the formation of stable investors, earnings expectations, which is not conducive to foreign investment; also easily lead to a floating exchange rate fluctuations in the prices to curb inflation difficult. Second, the exchange rate regime choice conditions fixed exchange rate system and floating exchange rate system is superior long debated the international financial sector issues. In fact, the exchange rate regime choice is determined by a series of objective conditions, different exchange rate regimes for different countries, depending on their economic strength, the external environment, macroeconomic regulation and control capability and international competitiveness. Overall, what kind of a country's exchange rate system must consider the following factors: 1. Countries the strength of size and economic strength of the country here refers to the GDP to measure the size of the country size. Big and strong economic strength, preparedness and ability to resist financial risks, exchange rate fluctuations is not strong in general, suitable for a floating exchange rate system. For example, the United States, is the most typical of countries with floating exchange rate system, but because of the impact of technological revolution, faster labor productivity, economic fundamentals are good, internationally competitive, it does not adversely affect the floating exchange rate, on the contrary, foreign investment, the United States is the world's largest country. Such countries are usually more dependent on monetary policy. Small, weak strength of the weak economy, weak macro-control by external impact, low risk-resisting ability, international competitiveness is not strong, large exchange rate volatility, if a floating exchange rate, its negative effects will be more than beneficial effects , resulting in investment expected, the inflation can not control the situation. As these countries is more difficult to achieve external balance, so they need to play a regulating role of exchange rate policy, so more suitable for a greater degree of implementation of intervention in the exchange rate system, such as the fixed exchange rate system or managed floating exchange rate system. 2. The economic fundamentals of the health of the adequacy of reserves, the strength of the international competitiveness of healthy economic fundamentals, reserves the full, internationally competitive, with a strong anti-risk ability of countries floating exchange rate system is more desirable. In contrast, poor economic fundamentals, or foreign exchange reserves are not adequate, or international competitiveness is not strong, weak anti-risk ability, a few who can not meet, it is desirable that a fixed exchange rate system or a managed floating exchange rate system. To China, for example, better macroeconomic fundamentals in China, a considerable economic strength; foreign exchange reserves more; but are less competitive internationally, especially in the financial system is not perfect, the financial supervision mechanism is not perfect, so should the government intervene more higher degree of exchange rate system. 3. Mobility of capital in conditions of free capital mobility, fixed exchange rate vulnerable to the impact of speculative capital and may lead to financial crisis. In terms of capital flows are regulated under the fixed exchange rate will be no major danger, and, because capital flows are regulated, fixed exchange rate and the effectiveness of monetary policy will no longer conflict between, for example, is the case in China. 4. Level of inflation in the inflation rate, exchange rate effects on the general price level suitable for the larger countries a fixed exchange rate system, such as the situation has improved since the time of inflation, adjust the exchange rate regime to avoid the fixed exchange rate negative impact. In contrast, countries with high inflation rate is not floating exchange rate system can be implemented. These conditions alone can not decide what exchange rate system, but should look at the conditions for a certain period combination. No single exchange rate regime is fixed, the choice of exchange rate regime should be based on changing conditions.

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