Based on the risk premium channel of exchange rate transmission, Chinas interest rate regulation inflation and foreign exchange reserve hedging intervention rate are included in the new Keynesian policy model, and a dualobjective and dualtool policy analysis framework is constructed. Compare the economic mechanism and effect of the inflation target and the exchange rate target under the Taylor rule and the dualobjective dualtool rule. The simulation shows as follows: (1) Under the dualtarget and dualtool policy framework, the inflation target and the exchange rate target can coexist. At this time, the exchange rate risk premium to peg the exchange rate does not affect inflation; while the singletool policy cannot coexist with the two goals, at this time, the domestic The rate of return on the assets pegs the exchange rate will stimulate residents consumption behaviour to cause inflation. (2) Under the impact of international capital, the dualobjective and dualtool policy can ensure economic stability while fixing the exchange rate; and when the terms of trade deteriorate, choose the fully floating exchange rate. The system is optimal. The central banks policy loss analysis further validates the above conclusions. (3) With the deepening of financial market reform, the effectiveness of the stable exchange rate of foreign exchange reserves will decline, and the writeoff cost will increase substantially. Under the opening of the capital account, the dualobjective and dualtool policy remains the preferred policy for the central bank to resist external capital shocks. However, after the exchange rate is marketized, there is basically no difference between the inflation target system and the dualtarget dualtool policy. The conclusion of the conclusion is that in the face of international capital, necessary exchange rate controls are needed; but in the face

of trade shocks, exchange rate flexibility can be moderately increased to reduce the impact of shocks on output and inflation.