Effects of Chinas Foreign Exchange Policies Effects on Price Stability(PDF)
《南京师大学报》(社会科学版)[ISSN:1006-6977/CN:61-1281/TN]
- Issue:
- 2013年05期
- Page:
- 56-63
- Research Field:
- Publishing date:
Info
- Title:
- Effects of Chinas Foreign Exchange Policies Effects on Price Stability
- Author(s):
- SHEN Yong; FENG Sixian
- Keywords:
- foreign exchange rate; foreign exchange policies; foreign exchange reserves; appreciation of RMB; price stability
- PACS:
- -
- DOI:
- -
- Abstract:
- For a long time, China has followed a “half open and half closed” foreign exchange policy. It means that the mechanism of foreign exchange policies on price stability in China will be significantly different from those of other open economies. This paper shows that foreign exchange rate policies always interfere with foreign exchange reserve policies when maintaining price stability. The effect of foreign exchange reserve policies on price is much stronger than exchange rate policies. The effect on domestic prices by the appreciation of RMB is offset by the increase of foreign exchange reserves. The acting direction of RMBs appreciation on domestic prices may be even reversed by excessive foreign exchange reserves. The appreciation of RMB will not be helpful to lower domestic price level. China should not pursue simple growth in foreign exchange reserves. It has to reduce the negative impact on domestic price stability by excessive foreign exchange reserves.
Last Update: 2013-09-25