The Mechanism of Stability and Dynamic Process of RMB Exchange Rate(Ⅰ)--Modelling
人民币汇率的稳定机制及其动态过程(Ⅰ)--模型构造

This paper attempts to construct a theoretical model that can be used to investigate the mechanism of stability and dynamic process of RMB exchange rate in China. Considering foreign exchange control and managed floation rate system of China, which has been maintained since January 1,1994, this paper gives an economic analysis on changes in supply and demand in the national foreign market, using exchange rate economics theory and systematic method. Especially, it is detected that is the relation between exchange rate stability and changes in foreign exchange reserves in this study. Based on structural equation, which could be used to reflect changes in foreign exchange reserves in order to stabilize RMB against the U.S. dollar bilateral exchange rate by taking into account net capital inflow, inports and exports, and exchange rate expectation as well, the model is built and discussed.