A Study On Real Exchange Rate And Equilibrium Exchange Rate Of RMB

China's current foreign exchange rate system is called a "managed floating rate system", which means the exchange rate is based on the supply and demand in the foreign exchange market, but the central bank can influence the market by its selling or buying activities. The debate has been going on since 2002 on whether the RMB is undervalued or overvalued. Japan and the United States have long blamed China for keeping the RMB exchange rate at a low level to maintain its trade surplus.The dissertation seeks to provide an overview of RMB exchange rate. Firstly, the movements of RMB real exchange in recent twenty years are described. Two ARIMA models that can be used to predict RMB real exchange rate are given. Then all kinds of factors that can affect RMB real exchange rate are discussed based on the Balassa-Samuelson theorem. The author estimates the equilibrium exchange of RMB using cointegration analysis and H-P filter based on Stein's NATREX model, and analyzes the misalignment of RMB empirically.Chapter 1 is prolegomenon, in which the relevant research productions in domestic and abroad are introduced. The paper's construct and major research methods are also explained in this chapter, including the definition of Real Exchange Rate, Effective Exchange Rate and Equilibrium Exchange Rate.In chapter 2, we focus on the movement of RMB real exchange rate. The indexes of RMB real exchange rate including bilateral and multilateral are calculated or presented. We tested and found that neither nominal nor real exchange rate of RMB is a stationary series, so do the America GDP Deflator Index and the China GDP Deflator Index. Our conclusion is that, PPP approach does not fit RMB in shot term. According to ARIMA theory, we finally have two models for RMB real exchange rate.In chapter 3, we analyze the relationship among real exchange rate, Trade Real Exchange Rate and Internal Real Exchange Rate; among real exchange rate, Trade Real Exchange Rate and Relative productivity of non-traded department, based on the Balassa-Samuelson theorem, being decomposed in modern expression. We find that the Balassa-Samuelson effects can work only when series assumptions can be filled. We calculated the internal relative prices (the relative price of non-traded price to trade price), both China and America. Find the internal relative prices are appreciation in both America and China, but America is higher than China. We tested and find that Change Rates of RMB real exchange rate, Change Rates of Trade Real Exchange Rate, ChangeRates of China internal real exchange rate, Change Rates of America internal real exchange rate are all first rank integration series. There is cointegration among them. Our conclusion is that the Balassa-Samuelson theorem can work in china partly, as tradable commodity price descent and non-tradable commodity price ascent, not by wages change in non-tradable department. Because America internal real exchange rate appreciate higher than China in the past twenty years, the depreciation trend of China real exchange rate can be explained based on the Balassa-Samuelson theorem.In chapter 4, we draw on the concept of a Natural Equilibrium Real Exchange Rate (NATREX) model developed by Jerome Stein. The NATREX approach to real exchange rate estimation does not require that the observed REER and the equilibrium real exchange rate be stationary. The general working model of the NATREX includes the following four variables: terms of trade variable (TOT), productivity (PRD), world real interest rate (R) and real government spending (G). We check the model using Chinese data, and replace the variable productivity with open. Finally, we get the long equilibrium model of RMB real effective exchange rate.From the model we know that the higher government spending, world real interest rate, terms of trade variable being, the more the equilibrium real exchange rate will appreciate; the higher open being, the more the equilibrium real exchange rate will depreciate.In order to get the sustainable or permanent value of the...