Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China

Research Article

Federal Reserve Interest Rate Policy and US-RMB Exchange Rate: Evidence from ARIMA Model

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  • @INPROCEEDINGS{10.4108/eai.28-10-2022.2328411,
        author={Tengjie  Ji and Minglu  Yu and Ao  Zhang},
        title={Federal Reserve Interest Rate Policy and US-RMB Exchange Rate: Evidence from ARIMA Model},
        proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China},
        publisher={EAI},
        proceedings_a={FFIT},
        year={2023},
        month={4},
        keywords={interest rate policy; exchange rate; time series model},
        doi={10.4108/eai.28-10-2022.2328411}
    }
    
  • Tengjie Ji
    Minglu Yu
    Ao Zhang
    Year: 2023
    Federal Reserve Interest Rate Policy and US-RMB Exchange Rate: Evidence from ARIMA Model
    FFIT
    EAI
    DOI: 10.4108/eai.28-10-2022.2328411
Tengjie Ji1, Minglu Yu2, Ao Zhang3,*
  • 1: South China Agricultural University
  • 2: Soochow University
  • 3: Northeast Forestry University
*Contact email: s1210209@stu.cpu.edu.cn

Abstract

Since 2022, the Federal Reserve has raised its benchmark interest rate several times, profoundly affecting the volatility of exchange rates across countries This paper assumes that if the Fed does not raise interest rates, the USD-RMB exchange rate can be estimated and pre-stored by the ARMA model. Accordingly. This paper first tests the biased autocorrelation and autocorrelation of exchange rate returns through PACF and ACF, respectively. After determining the AR and MA orders, the ARMA model is constructed and overstated for multiple periods. By using an autoregressive moving average model (ARIMA) to predict the exchange rate movements without the rate raise and comparing it with the actual exchange rate movements after the rate rise, this paper finds that the Fed's rate rise has led to a depreciation of the RMB, which has had an impact on our economy. In light of this unusual volatility, China needs to analyze and adjust to problems such as asset devaluation promptly.