Recently with the speeding progress of RMB internationalization, the co-movement between exchange rate of RMB and monetary policy is becoming stronger and stronger. In this article, we test the mutual effect between monetary policy and exchange rate with FAVAR model. The results show that both interest rate and money supply have impact on exchange rate fluctuations, but interest rate is more effective. Besides, the effect of exchange rate fluctuations on interest rate is greater than that of money supply, and the interaction between interest rate and exchange rate is becoming closer. In view of this, the authority should pay attention to the sensitivity analysis of exchange rate fluctuations, and constantly strengthen the coordination between exchange rate policy and interest rate policy; control means should be price-based tools instead of number-based tools.
SHEN Yue, WANG Fei, GUO Pei-li.An Analysis of the Interaction Effect of Exchange Rate Fluctuation and Monetary Policy Regulation —Based on the Perspective of RMB Internationalization[J] Economic Survey, 2017,V34(4): 55-61