Study On The Effect Of The Fluctuation Of Real Effective Exchange Rate On The Import And Export Trade

Exchange rate which is also known as foreign exchange market or exchange price plays an important role in conversion price in international finance and international trade. The drastic fluctuation will affect economic stability and development in a country. Therefore, the fluctuation of exchange rate is regarded as a method of competing and expanding internationally. Generally speaking, the rising of exchange rate will cause the export increase, and the falling of exchange rate will help to stimulate the import. Along with the deepening of economic globalization, the development of foreign trade industry has become an important prerequisite for the national economic growth.Since the reform and opening, China's economy has made great progress. During recent years, our country's huge double-surplus has been increasing continuously. Since 2005, the RMB has appreciated nearly 20% under the internal and external pressure. Yet it does not change the situation of trade surplus. Furthermore, the foreign exchange reserve is accumulating rapidly as well. Now the bilateral exchange rate is difficult to accurately describe the current fluctuation. But as a weighted average of bilateral exchange rate, the effective exchange rate can reflect one country's overall competitiveness. The thesis based on practical situations adopts the method of empirical analysis and synthetically applies the international trade, statistics and econometric's theory to research on the import and export trade structure round both the real effective exchange rate of RMB and China's trade balance.The thesis starting with basic theories analyzes the reasons of RMB appreciation and variation of RMB nominal exchange rate, and then makes use of specific data to research the relations between the real effective exchange rate of RMB and the trade balance. Finally, the thesis puts forward some reasonable suggestions to coping with RMB appreciation such as optimizing the industrial structure, expanding domestic demand, strengthening the management of the exchange rate risk and monitoring the cross-border capital.The empirical results indicate that there exist co-integration relationships between the amount of import and export and the real effective exchange rate of RMB. Moreover the fluctuation of real effective exchange rate of RMB is the Granger reason of the import and export. The change of real effective exchange rate will cause the change of our trade balance.