Abstract: With the continuous change of US monetary policy, the pattern of international capital flow has been constantly changing from quitting quantitative easing monetary policy to returning to quantitative easing monetary policy. In addition, China′s financial market has gradually opened up in recent years. The change of short-term international capital flow has brought challenges to the stability of RMB exchange rate.By constructing Markov switching-VAR model, this paper empirically analyzes the dynamic impact of short-term international capital flow on RMB exchange rate by using the data from July 2005 to March 2018.The results show that: through the transmission channels of exchange rate expectation, money market, balance of payments, relative inflation and relative interest rate difference, short-term international capital flow has a positive impact on RMB exchange rate, and shows different characteristics and asymmetry under different market conditions;at the same time, the change of RMB exchange rate has a reverse effect on short-term capital flow. Therefore, China should strengthen the supervision of short-term international capital flow, accelerate the reform of RMB exchange rate mechanism, and coordinate the exchange rate policy and interest rate policy, so as to ensure the stability of China′s financial market and the steady operation of China′s economy.

Key words: short-term international capital flow, RMB exchange rate, transmission channel, MS-VAR model, impact