??Federal Reserve interest rate rising, CNY exchange rate and price fluctuation

【Author】

FU Guangmin

【Institution】

Small and Medium Enterprise Development Promotion Center of Zhejiang Province;Zhejiang Economic Operation Monitoring Center

【Abstract】

As China has gradually enhanced its interactions with other countries, Chinese economy is more prone to foreign monetary policies. By building up two-country DSGE model, this article uses parameter calibration method to select model parameters and utilizes economic variable fluctuation characteristics and impulse response function to analyze how US interest rate rising affects CNY exchange rate and relative prices. Research results show that increasing US interest rate will lead to decrease of Chinese inflation rate and stock price. CNY exchange rate will depreciate, which does not necessarily increase export. With the impact of US interest rate rising, the relative volatility of Chinese stock price is the greatest followed by CNY exchange rate and inflation rate. The relative volatility of interest rate is the smallest. In the end, this article proposes some suggestions such as improving macro-control policies and enhancing macro-prudential financial management system.

【Keywords】

USD interest rate rising;policy spillover;CNY exchange rate;the two-country DSGE model

References

To explore the background and basis of the node document

Springer Journals Database

Total: 18 articles

  • [1] Liu Bin, Development and Application of the DSGE Model for Monetary Policy Analysis in China, Journal of Financial Research, 2008 (10)
  • [2] HUANG Zhigang, Exchange Rate Pass-Through in an Improvement Trade Economy: A DSGE Approach, Journal of Financial Research, 2009 (11)
  • [3] Liu Yaocheng & Xu Xiaoping, Consumption Substitution Elasticity、Economy Opening and China's External Imbalance, Statistical Research, 2010 (04)
  • [4] Yuan Shenguoa,Chen Pingb and Liu Lanfenga(a:Guangdong University of Foreign Studies;b:Sun Yat-Sen University), Exchange Rate System,Financial Accelerator and Economical Undulation, Economic Research Journal, 2011 (01)

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