A Study On The Inherence Mechanism Supporting RMB Nominal Exchange Rate Keeping Long-run Steady

RMB exchange rate always keeps steady whether RMB has to be depreciated since 1997 or has confronted the pressure of RMB appreciation since 2003. In this paper, the author analyses the characteristics and tendency of RMB nominal exchange rate during past 25 years. Then, the inherence mechanism that supports RMB nominal exchange rate maintaining steady is studied systematically.Firstly, some concepts and targets which are going to be involved are discussed and defined. Then, the evolutions of the international and RMB exchange rate regime are reviewed.Secondly, the author researches the regime reasons that RMB nominal exchange rate keeps steady for a long time. Conclusion shows that this stabilization is determined by characteristics of RMB exchange rate regime to a certain extent.In the third part, the author researches the economic reasons that RMB nominal exchange rate keeps steady. The RMB long-term equilibrium exchange rate model is inferred by using the Augmented Dickey-Fuller test and the static regression analysis. Then, the author uses the model to reckon RMB equilibrium exchange rate. Conclusion shows that RMB real effective exchange rate is overvalued in the long-term. By using the purchasing power parity model to calculate RMB medium-term exchange rate, we find out that RMB nominal exchange rate is undervalued in intermediate stage.Fourthly, the author studies the aspects that the change of RMB real effective exchange rate impacts on imports, exports and foreign investment. The author infers three different models about RMB real effective exchange rate which impacts on imports, exports and foreign investment by using the Augmented Dickey-Fuller test and the static regression analysis. The conclusion is RMB real effective exchange rate is positively correlated with exports and imports, but is negatively correlated with foreign direct investment.Finally, the author expects it could provide some theory supports to policy formulation about the RMB exchange rate reform and the exchange rate determination.