Estimation Of The Equilibrium Exchange Rate Of RMB

Exchange rate problem has been always as a hot topic in domestic and overseas study. The equilibrium exchange rate in this paper is the exchange rate when internal and external equilibrium come true. Our objective to study equilibrium exchange rate is to justify whether or not exchange rate is in misalignment,and based on which,establish the corresponding macroeconomic measure. So study of the equilibrium exchange rate has very important actual implication. The paper give a brief introduction of the existing foreign and domestic theory concerning equilibrium exchange rate,and the paper makes the corresponding comparison with each other. It chooses Montiel equilibrium exchange rate model as theory base of measuring RMB equilibrium exchange rate and do some proper modifications combined with China's realities. Applying this model gives us some theoretic basement for the relations between RMB's equilibrium exchange rate and several other basic factors and it make foundation for following empirical analysis. Then,based on the modified model, this paper makes empirical analysis of RMB's equilibrium exchange rate ,in terms of seasonal data since 1984,we use ADF unit root test show whether every variable is a stationary series. Then make Johansen cointegration test between RMB exchange rate and determinative factors, which had passed ADF unit root test. We make error correction model test in the premise of cointegration test,finally calculating the RMB equilibrium exchange rate by H-P filter. This paper eventually measures RMB's equilibrium exchange rate and compares our results with real effective exchange rate. And at same time we compare the real exchange rate with the equilibrium exchange rate, which calculated through cointegration equation. On the basis of this,we analyze the misalignment and china's concrete status after 1980s, and provide the corresponding policy advice.