The Concrete Investigation Pointing to CNY Exchange Rate from The Perspective of Mundellian Trilemma

Ruoxuan Li and Zimu Wang ()
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Ruoxuan Li: Nanjing University of Finance and Economics, A freshman, Department of Finance
Zimu Wang: A Freshmanthe Massey Institute, Nanjing University of Finance and Economics

A chapter in Proceedings of the 2024 9th International Conference on Social Sciences and Economic Development (ICSSED 2024), 2024, pp 611-622 from Springer

Abstract: Abstract The objective of the study is to analyze the changing trends of the RMB exchange rate policy in recent decades from the perspectives of national policies, the development history, and potential advantages and disadvantages, using the main research method of The Impossible Trinity. This study adopts a desktop research method, focusing on the definition and main content of The Impossible Trinity, the current situation of RMB exchange rate policy, and the possible selection of RMB exchange rate system based on the theory of The Impossible Trinity, to study the reform of RMB exchange rate policy. The results of the study reveal that the main characteristics and reasons for the formation of the RMB exchange rate policy are the diversification of international trade currencies (such as the US. Dollar), the lessons learned from a basket of monetary policies, and the combination of a socialist market economy system. At the same time, it also brings potential shortcomings (the fluctuation of the restricted RMB exchange rate, the affected RMB exchange rate owing to trends of US dollar exchange rate, the contradiction between capital account and exchange rate policy changes, the forced increase in starting-up funds of foreign-funded enterprises, and the need for the further improvement in exchange rate market policies). Therefore, the choice of the RMB exchange rate system should effectively increase the proportion of the RMB in the international market, effectively control the range of RMB fluctuations, and thus achieve a true exchange rate system, which is market-based, single and managed. Ultimately, Chinese monetary system will achieve balance.

Keywords: Mundellian Trilemma (the impossible Trinity); CNY Exchange Rate; Choices; Defects (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-459-4_69

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DOI: 10.2991/978-94-6463-459-4_69

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