An Analysis on the Divergence of Monetary Policies Between China and the United States and Its Impact on the Trend of RMB Exchange Rate
Year: 2024
Type: article
Abstract: The monetary policies of China and the US have differed due to their differing economic circumstances and stages of growth, which has had a significant impact on the RMB exchange rate's trend. This paper uses empirical analysis to examine the three channels—market expectations, China's foreign trade, and international capital flows—through which the monetary policy divergence between the two countries influences the RMB exchange rate. It also provides a detailed introduction to the historical development and current state of the policy divergence between the two countries.The findings demonstrate how market expectations are impacted by China and the US's divergent monetary policies, which first alter the US dollar index and interest rate disparity before influencing the direction of the RMB exchange rate. Finally, relevant suggestions are put forward on how to keep the RMB stable while addressing the strain on China's monetary policy brought on by the US and China's divergent monetary policies.
Author: Shuo Ma
Institution: Tongji University
Language: English
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4403372011