The term "exchange rate overshoot" is interpreted as: viscous price monetary analysis method, also known as exchange rate determination. The so-called overshoot usually means that the short-term response of a variable to a given disturbance exceeds its long-term stable equilibrium value, which is followed by the opposite adjustment.

The reason for this phenomenon is that the price of commodity market is "sticky" or "lagging". The so-called sticky price refers to the short-term stickiness of commodity prices, but with the passage of time, the price level will gradually change until it reaches its new long-term equilibrium value.

Purchasing power parity is not established in the short term, that is, the price level of commodity market is sticky because of the different adjustment speeds of commodity market and asset market. The adjustment is gradual, but the asset market is extremely sensitive and will quickly adjust interest rates to restore the balance of the money market; In the long run, purchasing power parity can be established; Interest rate parity without offset is always established.

Foreign exchange rate:

Exchange rate, also known as foreign exchange rate, foreign exchange rate or foreign exchange market, refers to the ratio or price of one country's currency to another country's currency or the price of another country's currency expressed in one country's currency. Exchange rate changes have a direct regulatory effect on a country's import and export trade. Under certain conditions, exports will be promoted by devaluing the local currency, that is, lowering the exchange rate.

The role of restricting imports; On the other hand, the appreciation of the local currency, that is, the rise of the exchange rate, plays a role in restricting exports and promoting imports. Exchange rate The exchange rate between two currencies can also be regarded as the value of one country's currency against another. Exchange rate is also a financial means for a country to achieve its political goals.