The Effect Of Fluctuation Of RMB Real Exchange Rate On China's Import And Export Trade

Exchange rate,as the ratio at which one currency can be converted into another currency,is an important instrument for achieving the internal and external balance of an economy. And it also is the most direct and most effective means of regulating the international economic competition relationship. After the breakdown of the Bretton Woods System in 1973,large exchange rate movements appeared in the floating exchange rate system,and the growth in world trade had a significant slowdown,which motivated the study of the impact of exchange rate volatility on world trade.In recent decades,the world economy develops towards globalization rapidly. The liberalization of capital flows,the great increase in the scale and variety of international financial transactions and trade,which would increase or reduce the impact of exchange rate volatility on world trade in different directions. Beginning form July 21st,2005,China implemented a regulated,managed floating exchange rate system based on market supply and demand and in reference to a package of currencies. To June,2007,the exchange rate of Renminbi is expected to appreciate by some 8.1 percent against the dollar for 7.6075 yuan. With the deepening of RMB exchange rate reform,an increasing fluctuation of RMB exchange rate will exert great impact on China's economy and international trade. Meanwhile,the huge foreign trade surplus has also brought great pressure on the RMB exchange rate formation mechanism reform,which is the potential risk to China's economic development. Therefore,the analysis of the impact of RMB exchange rate fluctuations on China's foreign trade has important practical significance.Based on the background of RMB exchange rate volatility increasing,we will analyze the relationship between real RMB exchange rate volatility on China's trade. This paper is divided into five parts. The first part is the introduction; the second part is to describe the history and status of the RMB exchange rate and China's trade,summarize domestic and international research on the impact of exchange rate fluctuations in international trade theory,empirical analysis framework,the conclusions and some special studies; the third part is to introduce the research model of the exchange rate and the international trade,and to test whether China's exchange rate and trade data following ML conditions and J-curve effect or not,the fourth part is to establish some econometric models,such as the unit root test,cointegration analysis,and according to the data output,then test ECM or Granger causality test from empirical analysis of the RMB exchange rate and China's import and export trade to quantify,the fifth part is to sum up relationship between the exchange rate fluctuations and trade,then we put forward some policy suggestions for the reform of the RMB exchange rate mechanism and the improvement of China's international trade.