Study On Short And Medium Term Equilibrium Exchange Rate Of RMB Based On BEER Model

The issue of exchange-rate has always been important to the management of national economy. With the financial libernalization and the amalgamation of world economy, exchange-rate plays an important role in national economy as a main means of adjusting the macro economy. As one of the core issue of exchange rate theories, equilibrium exchange-rate is not only a standard to judge whether the exchange-rate is misadjusted, but also an important basis of whether exchange-rate policy needs to be adjusted. However, RMB exchang-rate issue has been fiercely debated since the Financial Crisis in Asia. During the last few years, the situation seems to become worse. The debate on RMB exchange-rate policy has put China into an awkard position of international relations. Facing the complicated international environment and changeful economic situation, we have to ask ourselves these questions: is the current exchange-rate reasonable? What's the equilibrium exchange-rate of RMB? To answer these questions, we need to calculate the equilibrium exchange-rate of RMB accurately.This paper is based on the BEER model presented by McDonald. According to the specific condition, the model is modified and a new model is established, containing both macro economic factors and micro economic factor. Then equilibrium exchange-rate of RMB is calculated according to the sample from January of 2001 to November of 2005, and exchange-rate maladjustment is evaluated. Besides, the reasons that cause the maladjustment are analyzed. Finally, through the analysis of the factors that affect the adjustive function of equilibrium exchange-rate of RMB, we find that ambiguity of exchange-rate policy goal and faultiness of exchange-rate forming mechanism are the main reasons, and some suggestions are given to perfect the exchange-rate forming mechanism.