The Empirical Research On The RMB Equilibrium Exchange Rate

The exchange rate is the most important issue in the country's economic management. With the economic globalization and the financial liberalization, exchange rate as the main macroeconomic control measures and economic leverage play an increasingly prominent role in the development of the national economy. Balanced exchange rate theory can be easy judgment whether the rate is the need for adjusting the exchange rate policy and the main objective basis, which is one of the core issues.In recent years, China's economy has maintained rapid growth, and the current account surplus continued to expand. Both current account and capital account surplus and its foreign exchange reserves surge in the background .The voice of the international community has continuously called for the revaluation of the RMB. Through 2001, the voices about appreciation of the RMB is expected to hold a dominant position; developed nations, especially the United States, Japan, continued to exert pressure to China on the RMB to appreciate……On July 21st, 2005, the People's Bank of China declared: "China began to implement the managed floating exchange rate system based on market supply and demand,adjusted with reference to a basket of currencies. The RMB exchange rate will no longer be pegged solely to the U.S. dollar,but will use more flexibility in the RMB exchange rate formation mechanism and allow the yuan to appreciate against the dollar by 2.1%. Since the announcement, the U.S. dollar against the RMB transaction price adjusted for 1 dollar to 8.11 yuan. "Whether the RMB should be revalued seems to be settled with the introduction of the reform, but the fact is that reform did not make the argument cool on whether the RMB should be revalued. On the contrary, it leads to academia, business, even the ordinary people against of all conjectures on further appreciation of the RMB. For a time, whether the RMB should have further appreciation, when appreciation, as a matter of appreciation of the focus of discussion among the people, the business community, academics and policy authorities. To answer these questions, we need to know the equilibrium exchange rate of RMB to as standards on judge whether the RMB exchange rate imbalance, and how the maladjustment degree is.This article uses the equilibrium exchange rate model for developing countries (ERER) as the theoretical guidance, draws on the major achievements and experiences from the empirical study of the equilibrium exchange rate of the developing countries, then, uses the ADF unit root test and the two-step method Engle-Granger co-integration analysis to choose the fundamentals economic variables which impact the RMB exchange rate, selects the year data's about 1980-2005 to do empirical Analysis, and structures the equilibrium exchange rate model which suited to China. On this basis, it uses H-P filter method to estimate the equilibrium exchange rate of RMB. This article also conducts calculations and analysis on the imbalance in the RMB exchange rate since the 1980s, and tells whether the RMB exchange rate is undervalued or not, and the degree of imbalance. Finally, judge whether the RMB exchange rates is reasonable, and study the impact of exchange rate movements on China's economic development as well.The main conclusions are:①The real effective exchange rate of RMB exchange rate has fluctuated around the equilibrium exchange rate, and experienced varying degrees of overestimation and underestimation.②From 1980, the real effective exchange rate of the RMB exchange rate in most of the period has fluctuated from the equilibrium exchange rate, mainly about: undervalued period: from 1986 to 1988, 1991 to 1995, 2003 to 2005; overvalued period: 1996-2002.③The policy of pegging the exchange rate to the dollar is an important factor which caused the RMB exchange rate imbalance about the period 1997 -1998 and 2003 - 2005. Therefore, from the prospect of avoiding the imbalance of RMB exchange rate, after the reform of the exchange rate system, flexible exchange rate system will be more conducive to China's economy development. The paper's innovations are mainly as following:①This article uses the equilibrium exchange rate model for developing countries (ERER) as the theoretical guidance, draws on the major achievements and experiences from the empirical study of the equilibrium exchange rate of the developing countries, then, uses the ADF unit root test and the two-step method Engle-Granger co-integration analysis to choose the fundamentals economic variables which impact the RMB exchange rate, selects the year data's about 1980-2005 to do empirical Analysis, and structures the equilibrium exchange rate model which suited to China.;②It uses H-P filter method to estimate the equilibrium exchange rate of RMB. This article also conducts calculations and analysis on the imbalance in the RMB exchange rate since the 1980s, and tells whether the RMB exchange rate is undervalued or not, and the degree of imbalance. Finally, judge whether the RMB exchange rates is reasonable, and study the impact of exchange rate movements on China's economic development as well.③It systematically summarized and evaluated the Western countries equilibrium exchange rate theory; clarified the concept of the equilibrium exchange rate, and caught on the way of the equilibrium exchange rate decision.