Research Of RMB Real Effective Exchange Rate Basing On The International Competitive Power

In opening economy, the rate of exchange as a variable of the core economy modulating and connecting various Macro-economic factors, and it also affect the balance of national economy to the inside and outside. The rate of exchange economy used as an important theories developed fast in 20th century, particularly after Bretton Woods system broke up in the 70's, that managed floating exchange rate established promotes the development and prosperity of the rate of exchange economics. However still up to now there is no a kind of theory of exchange rate decision can be applicable to all the national rate of exchange decision, this primary reason is that economic development condition, economic construction and other main factors affecting the trend of the RMB rate of exchange in any country are different with each other. This paper will analyze the trend from the angle of the international competitive power. This paper reviews the related theories and documents of the effect of international competitive power on rate of exchange. And then, on the basis of analyzing the effect of changes of the international competitive power on RMB real effective exchange rate, this paper mainly aims at assessing the effect of the international competitive power by means of combining qualitative methods and quantitative methods. Quantitative methods include main composition analysis method, factor method, ADF, Granger causality test and ordinary least squares. This paper draws conclusion as followers. Firstly The Chinese international competitive power can explain the change of RMB rate of exchange, which can pass the statistics examination. Secondly the deviation between the international competitive power of China and RMB real effective exchange rate is more serious before 1994 than after 1994, which is because exchange rate policy is different after 1994 to before 1994. Thirdly, the international competitive power of China affecting RMB real effective exchange rate has obvious J-curve effect. Finally, this paper makes comments and gives some suggestion on the basis of above analysis. The author think that the international point about RMB currency value under-estimating mainly base on the political reasons rather than the economic reason, hence I feel that we need mollify the current pressure from both short-time and long-time. Firstly, we need use political means to dissolve the pressure by enhancing the communication and promoting the comprehension. Secondly, we must push forward continuously the Chinese rate of exchange system reform in order to dissolve the pressure in the root, which is the most important one of all the countermeasures.