Impact of US monetary policy uncertainty on RMB exchange rate volatility:The role of international capital flows

This study investigates the impact of US monetary policy uncertainty on the volatility of the Chinese RMB exchange rate using a counterfactual SVAR model. Additionally, we examine the transmission mechanism from the perspective of different types of international capital flows. The findings suggest that an increase in US monetary policy uncertainty worsens RMB exchange rate volatility, and can have a significant impact on RMB exchange rate volatility through the intermediate transmission of China's direct investment flows and portfolio investment flows. Notably, the increase in US monetary policy uncertainty worsens RMB exchange rate volatility through these two channels respectively, before and following the "8.11″ exchange rate reform in 2015.