The Influences Of RMB's Exchange Rate Fluctuation On Chinese Foreign Trade

Exchange rate is simply the price of one currency in terms of another. As essential constituent part of price system, exchange rate will exert important influences on a county's foreign trade because its fluctuation can change the comparative price of import and export goods. Therefore many countries take exchange rate as an adjustment instrument in order to regulate trade balance.The article evaluates the related influences of RMB's exchange rate fluctuation on Chinese foreign trade in both theoretical and empirical angles. I divide this article into four chapters.Chapter I is the theory analysis of the influences of the exchange rate fluctuations on foreign trade. Firstly, it analyses the main trade theory — Elasticity Approach, and then focuses on Marshall-Lerner Condition and J-curve effects. On this basis, it gives the introduction and assessment of the domestic and foreign research results in this field and related literature.The second chapter reviews all the Chinese stages that how the adjustment of exchange rate influence foreign trade on the basis of the theory analysis, and compare the actual data of import and export trade volume and REER from 1980 to 2002 to observe and the import and export movements caused by the increase of RMB exchange rate.In the third chapter, a new REER index is constructed, and has an empirical research by some quantitative methods. Quantitative methods include ADF, Granger causality test and ordinary least squares.This research draws conclusion as followers: The whole absolute value of import's price elasticity of demand and export's price elasticity of demand 2.048629 is more than 1 which conforms to the Marshall-Lerner condition. If RMB depreciate, trade balance can be improved. At the same time, the regression analysis models indicate that the relevant test coefficient is 0.852266 and 0.784427. The influence of real effective exchange rate's fluctuation on Chinese...