Author(s)

Shichao Hu, Qing Mao, Xinxin Jing

Corresponding Author

Xinxin Jing

Abstract

In the past few years, the rise of Chinese economy in the world is commonly witnessed, so RMB exchange rate has gradually become an economic variable affecting the world economy that cannot be neglected. Under this background, this paper combines with monetarism research framework with mature foreign research, takes the currency model of elastic prices as the starting point, and establishes vector auto-regression model to study the factors influencing RMB exchange rate variation. Because there are rare researches on this aspect domestically, RMB exchange rate is the important economic variable gradually concentrated by domestic and foreign scholars, this paper also equips with significant theoretical and realistic meaning. The main discoveries of this paper include: 1. Excessive currency has the biggest effects on RMB exchange rate. 2. The pushing appreciation function of domestic economic increases (including first order lagging term) on RMB exchange rate. 3. The increase of current domestic v and FIR value will all lead to the depreciation trend of RMB exchange rate.

Keywords

Monetarism, RMB exchange rate, Excessive currency, Vector auto-regression.