Empirical Analysis Of RMB Effective Exchange Rate And Chinese Exports

Under the environment of serious exchange rate situations, big pressure of RMB appreciation, many international trade frictions and politicized currency issues, Johansen multivariate cointegration method and vector correction model (VEC) are applied to measure the impact of RMB effective exchange rate based on monthly data. And the RMB effective exchange rate variability is estimated by the conditional variance of a combined GARCH-GED model, which is distinct in this paper. Considering exchange rate volatility may have different influence on different sectors, the exports which are classified as total exports and several sector exports by Standard International Trade Classification (SITC) are been investigated and compared. The results show price elasticity of foodstuffs & beverages and manufactured goods is rather big, suggesting Chinese exports of foodstuffs & beverages and manufactured goods succeed in the low price and have a limited power to determine the prices. While the industrial materials'price elasticity is rather small, which shows industrial materials are less affected by the change of price and exchange rate. The empirical analysis can't deny that appropriate exchange rate variability is helpful to the exports. In the long run, it can't deny exchange rate variability improves Chinese industrial structure and the method of commercial trade.The structure of this paper is as follows:Chapter one is introduction. It introduces the background, meaning and goal of this paper, review of former literature and the framework.Chapter two introduces exchange rate firstly, and then summaries the methods to measure exchange rate volatility, introduces the effects of exchange rate lastly.Chapter three reviews some models and knowledge, like nonstationary time series, stationary test, cointegration test and error correction model.Chapter four is the empirical study. Using monthly data, we modeled on the sector exports and total exports to find the effect of exchange rate volatility on exports in the long and short term.Chapter five is conclusion.