The significance of the floating decline of the currency exchange rate and the impact of the decline

1. On the positive side.

If the local currency depreciates, then the purchasing power of foreign currency is strong, so that a certain amount of foreign currency can buy more domestic products, which means that domestic products are relatively cheap in the international market, so that exports can be increased; On the other hand, if the local currency depreciates, foreign goods** will be expensive, so domestic imports will inevitably decrease. Therefore, the result of the depreciation of the renminbi is to expand exports, suppress imports, increase the surplus, and promote economic development.

2. If the RMB depreciates, there will also be many unfavorable factors.

The depreciation of the local currency will cause friction to the outside world, which is extremely unfavorable to the stability of the national economy.

Depreciation will not solve the slowdown in external demand, and although depreciation will help exporters survive by reducing costs, it will not be sustainable. In particular, for industries that have lost their competitiveness, the depreciation will only delay the exit time.

The impact of differences in economic growth rates on exchange rate movements is manifold

One is that a country's high economic growth rate means that income increases, and the level of domestic demand increases, which will increase the country's imports, resulting in a current account deficit, which will make the national currency exchange rate**.

Second, if the country's economy is export-oriented, and economic growth is to produce more export products, the growth of exports will compensate for the increase in imports and ease the pressure on the exchange rate of the national currency**.

Third, a country's high economic growth rate means that labor productivity increases rapidly and costs decrease, thus improving the competitive position of domestic products and helping to increase exports and inhibit imports; And the high economic growth rate makes the country's currency favored in the foreign exchange market, so the country's currency exchange rate will have an upward trend.

Extended information: 1. If the country's economy grows rapidly, it will lead to the appreciation of the local currency externally and the depreciation of the domestic currency. Here's why:

1. It is not the currency that drives the economy, but the economy that drives the currency. Many people have always believed that the economic boom is largely due to the over-issuance of currency, but in fact, it is slightly biased. According to a research report in Business Times, the correlation coefficient between the growth rate of money and the rate of economic growth is only, which means that the effect of money on economic growth is actually very limited.

2. The economy drives high demand growth. For a long time, domestic economic growth was driven by fixed asset investment, which in turn drove the demand for credit. Therefore, when the growth rate of fixed asset investment soars, credit will be injected in large quantities, which will eventually lead to excess liquidity and increased domestic inflationary pressures.

3. The economic improvement makes the local currency have external appreciation pressure. The high growth of the economy has made global assets optimistic about the country's investment opportunities, so they will exchange their money into the country's currency for investment (assuming that the foreign exchange flow is not fully liberalized), resulting in a shortage of the country's currency and upward pressure.

4. The impact of internationalization on currency. The rapid growth of the economy also means the enhancement of the country's comprehensive strength, at present, China is also exploring the path of RMB internationalization, at present, in ASEAN, Russia and other places, the RMB has a certain status, in addition to we have signed currency swap agreements with many countries, which are all efforts to internationalize the RMB. This will make the international credit of the renminbi better and better, and become more and more sought after by foreign currencies, and under the premise of monetary independence, the status of the renminbi will become more and more active.

at a floating exchange rate.

Free movement of capital.

Expansionary monetary policy will increase the money supply, then the interest rate will fall, capital outflow, the exchange rate will depreciate, and the deficit in the balance of payments will increase, and the IS curve will move to the right until the balance of payments returns to equilibrium, so under the free flow of capital, the monetary policy is effective.

An expansionary fiscal policy will move the IS curve to the right, interest rates will rise, capital inflow, the balance of payments surplus, and the exchange rate will have the pressure of appreciation, which will increase imports, and the IS curve will move to the left until the balance of payments returns to equilibrium, so under the free flow of capital, fiscal policy is ineffective.

Capital is not liquid.

If the expansionary monetary policy will increase income, the balance of payments deficit, the exchange rate will depreciate, and exports will increase, then IS will move to the right until the balance of payments returns to equilibrium.

In the same way, fiscal policy is also effective.

Incomplete capital flow.

Expansionary monetary policy will cause interest rates to fall, income to increase, capital outflows, imports to increase, balance of payments deficit, pressure on the local currency to depreciate exports, IS to the right, until the balance of payments returns to equilibrium, so monetary policy is effective.

Similarly, fiscal policy is effective (incomplete capital flows, interest rates rise under expansionary fiscal policy, but capital inflows do not cover the balance of payments deficit).

1. Open market business.

The central bank buys bonds in the market and releases base money to the market, resulting in an increase in the amount of money and a decrease in interest rates.

2. Adjust the discount rate and reduce the interest rate on relending to commercial banks.

In order to encourage banks to borrow, so as to release the base money to the market and increase the amount of money.

3. Change the statutory reserve ratio. Increasing the money multiplier, i.e., the ability of the banking system to create credit money, increases the amount of money from hail slippage.

As far as the economic system that is sensitive to monetary policy tools is concerned, the information guidance effect of monetary policy tools often far exceeds its actual effect in terms of the regulation and control effect of monetary policy.

If you reduce the amount of money, then adopt a contractionary monetary policy

1. Control the amount of currency issued.

2. Raise the reserve requirement ratio.

Interest rates, rediscount rates.

to control the expansion of commercial bank credit.

3. Operate through the open market.

Sell central bills, repurchase and other adjustments to the amount of money, tighten bank credit.

4. Credit control.

The exchange rate, also known as the foreign exchange rate, foreign exchange rate or foreign exchange market, refers to the exchange rate between two currencies, and can also be regarded as the value of one country's currency against another. Specifically, it refers to the ratio or ratio of one country's currency to another country's currency, or the ** of another country's currency expressed in one country's currency.

Exchange rate changes have a direct regulating effect on a country's imports and exports**. Under certain conditions, by depreciating the national currency externally, that is, letting the exchange rate fall, it will play a role in promoting exports and restricting imports; On the contrary, the appreciation of the national currency to the outside world, that is, the exchange rate rises, which plays a role in restricting exports and increasing imports.

Economic impact. (1) The impact on the first balance of payments: the impact of the exchange rate on imports and exports: the increase in the exchange rate (direct pricing method) can play a role in promoting exports and inhibiting imports. (Foreign exchange rate**, local currency exchange rate**).

2) The impact on non-** revenue and expenditure.

1. Impact on intangible ** balance of payments: the exchange rate of a country's currency**, the increase in the purchasing power of foreign currency, and the low price of domestic goods and services. The decrease in the purchasing power of the local currency and the increase in the value of foreign goods and services are conducive to the improvement of the country's tourism and other labor balance and expenditure.

2. Impact on unilateral transfer income: If the exchange rate of a country's currency is unchanged or relatively slow, it will have an adverse impact on the country's unilateral transfer receipts and expenditures.

3. Impact on capital inflow and outflow: The exchange rate has little impact on long-term capital flow. In the short term, exchange rate depreciation, capital outflows; The appreciation of the exchange rate is conducive to capital inflows.

4. Impact on official reserves: Changes in the national currency directly affect the increase or decrease of the country's foreign exchange reserves through capital transfers and the increase or decrease of imports. Reserve currency exchange rate**, which causes the real value of the foreign exchange reserves of the country that maintains the reserve currency to suffer losses, and the reserve country profits from the depreciation of the currency to reduce its debt burden.

The problem lies in the statutory devaluation. The term statutory depreciation is used under a fixed exchange rate system, which contradicts the topic.

in the direct pricing method.

, exchange rate depreciation = exchange rate increase = currency depreciation.

The exchange rate is expressed directly and indirectly, and the direct price is expressed in the local currency of the unit of foreign currency, and the vast majority of countries in the world use the direct pricing method, and China is the direct pricing method.

As far as the concept of exchange rate is concerned, one currency represents the ** of another currency, which is just a number. For example, 1 US dollar = 7 RMB, 7 is the exchange rate, also known as the foreign exchange rate, 7 becomes 8 is the exchange rate rises, under the direct pricing method, the exchange rate rises = exchange rate depreciation = local currency depreciation.

The exchange rate of the local currency decreases, the local currency depreciates, and the foreign currency appreciates; The exchange rate of foreign currencies decreases, the foreign currency depreciates, and the local currency appreciates.

The exchange rate of the local currency increases, the local currency appreciates, and the foreign currency depreciates; The exchange rate of foreign currencies increases, foreign currencies appreciate, and local currencies depreciate.

Under a credit money system, the internal value of a country's currency is the internal purchasing power of that country's currency. Its size is determined by the goods and services that can be purchased per unit of currency, so the internal purchasing power of a currency is usually inversely correlated with the domestic price level of a country. Mathematically, the internal purchasing power of a currency is equal to the inverse of the country's domestic price level.

The so-called external value of currency refers to the convertibility of a country's currency to the outside world, usually expressed through the exchange rate, the more foreign currency exchanged, the higher the external value, and vice versa. Generally speaking, the internal value of a currency is the basic basis for determining its external value, but there is often a large deviation between the two, mainly because the external value of a currency not only depends on the size of the internal purchasing power, but also depends on the changes in the supply and demand of currency in the foreign exchange market, and the influencing factors are very complex, and various exchange rate theories have carried out in-depth analysis and research on these factors. Therefore, the internal value of money, the external value of money, the purchasing power of money, exchange rate, etc., are a group of concepts that are both interrelated and distinct from each other.

To put it simply, an exchange rate is a comparison of the size of two currencies.

Currently $1 can be exchanged.

RMB. The requirement of the United States is to exchange 1 US dollar for yuan, or even 1 dollar for 3 yuan, if 1 dollar = 3 yuan, China's goods will be very high, of course, we use yuan to buy things from other countries will feel very cheap.

If you want to travel and study abroad, it will also be very cheap.

The problem now is that China's renminbi is not a freely convertible currency, so the Americans are not able to manipulate the renminbi to the dollar, and they are very unhappy.

Therefore, they believe that it is China that controls the renminbi.

There is a joke circulating on the Internet that in 2010, an American exchanged $100,000 for 680,000 yuan. I spent a year eating, drinking, and being merry in China and spent 180,000 yuan.

In 2011, if the renminbi appreciated against the dollar to 5 to 1, he would be able to use the remaining 500,000 yuan to exchange for $100,000 to return to the United States, which is equivalent to eating, drinking and having fun for a year.

Remittance in RMB.

The rate of decline, the renminbi does not appreciate, but depreciates the dollar and other major international reserve currencies. The RMB exchange rate is calculated using the indirect pricing method, that is, 100 US dollars against RMB, if you see a small number, the appreciation of the RMB is a big you say the previous decline, the actual value, so the depreciation, the RMB exchange rate depreciates. Do you understand?

Currency appreciation and exchange rate decline is a kind of macroeconomic regulation and control behavior, balancing the balance of payments or balancing the relationship between the two and adopted a kind of monetary policy. Because currency appreciation means that the value of a country's goods rises compared to the outside world, if the exchange rate remains unchanged, relative to before the appreciation, the exchange rate is also the best, but this kind of ** will directly affect the country's macroeconomy.

For example, in the international export link, the domestic economic recession brought about by currency appreciation directly weakens a country's export competitiveness, which in turn affects the optimization of resource allocation worldwide and drags down the world economy.

In the international currency import link, although currency appreciation will attract some hot money to pour in, the main purpose of hot money is to earn the difference, which will eventually flow out of the country, and it will drive more currency out of the country, so that a country's currency is more scarce; Looking at the response of foreign long-term funds to currency appreciation, currency appreciation forces most products to be sold cheaply, which directly leads to enterprise bankruptcy, shutdown of production, shutdown of workers, and reduction of consumption index, and the deterioration of the investment environment will eventually force long-term investment to shift positions.

In the international import of goods, currency appreciation allows the trading counterparty to obtain less currency, which will make the trading counterpart choose to reduce the trading volume or cancel the transaction and find another buyer, thereby reducing social employment opportunities, national wealth and external total, causing economic recession and causing harm to the development of individuals, countries and the world.

Therefore, it is a common monetary policy to adjust the exchange rate to reduce the exchange rate when the currency appreciates.

Exchange rate calculation: The rate at which one currency is exchanged for another, that is, the exchange rate of one currency for another. Therefore, the exchange rate is also called the exchange rate. For example, if 1 100 foreign currencies are used as the standard and converted into a certain amount of local currency, it is called the direct pricing method.

China and most countries use the direct pricing method.

Example: 100 RMB = 10 USD.

Think of the renminbi and the U.S. dollar as multipliers rather than units.

That is: 100 * RMB = 10 * USD.

Conversion i.e.: RMB USD = 10 100 = exchange rate.

The exchange rate is the amount of currency that a country's currency can be converted to** other currencies.