Foreign Exchange Market Pressure and Monetary Policy: An Empirical Study Based on China’s Data
AbstractThe reform of exchange rate system in 2005 has settled down the floating exchange rate system with management in China. Until August this year, RMB/USD has appreciated about 16.65%. This paper measures the exchange market pressure (EMP) on RMB/USD, and use VAR model to analyze the relationship between EMP and domestic monetary policy . And from the results we find that the increase of China’s domestic interest rate of is the main cause of RMB pressure of appreciation, but the foreign interest rate has little effects on the pressure and it can affect the growth rate of China’s domestic credit. So,we deem that the theory of "ternary paradox" may not applicable to China, at least in the period of our investigation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14491.
Date of creation: 10 Jan 2009
Date of revision:
EMP Monetary Policy Foreign Exchange Intervention VAR Model;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-13 (All new papers)
- NEP-IFN-2009-04-13 (International Finance)
- NEP-MON-2009-04-13 (Monetary Economics)
- NEP-TRA-2009-04-13 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, Elsevier, vol. 39(3-4), pages 273-295, November.
- Weymark, Diana N, 1997. "Measuring the degree of exchange market intervention in a small open economy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 16(1), pages 55-79, February.
- Don E. Roper & Stephen J. Turnovsky, 1980. "Optimal Exchange Market Intervention in a Simple Stochastic Macro Model," Canadian Journal of Economics, Canadian Economics Association, vol. 13(2), pages 296-309, May.
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