The Analysis Of Balassa-Samuelson Effect In Exchange Rate Of RMB

Problem of exchange rate in RMB has been the focus problem in domestic and international academic circles, Since the center bank in china carries on the reform in mechanism of exchange rate in RMB on July 21st in 2005, the formation of exchange rate in RMB becoming inconstant, the rationality level of exchange rate will relate to financial market and balance of payments. There are two kinds of theory about how to make certain the reasonable level of the exchange rate of RMB in economics realm: one of the theory is the purchasing power price, another is Balassa-samuelsom Hypothesis effect. Balassa and samuelsom provid an appealing explanation of the long-run behavior of the real exchange in terms of the productivity performance of trade goods raise relative to nontrade goods. This research analyse exchange rate in RMB on base of Balassa-samuelsom Hypothesis effect in China.Firstly This research amend the Balassa- Samuelson hypothesis effect model according to the actual and economic characteristics in China, and our target is to analysis the cointegration between Real effect exchange rate and the difference of relative productivity. Secondly, we do demonstation from teo aspects: One hand we search China data on time-series for cointegration analysis; another hand this research make use of recently available data from a mumber of sources to assemble suitable data set for economic region, which is then utilized to obtain new time-series evidence on the operation of Balassa-samuelsom Hypothesis in China. Lastly, appling the Balassa- Samuelson hypothesis effect evaluation the exchange rate in RMB, put forward the policy suggestion for the the long-term change in the exchange rate in RMB.