Correcting For The Purchase Power Parity And An Analysis About The Balassa

All along, purchasing power parity(PPP) is considered as a basic and explainable theory which plays the most important role about the determination of the study about exchange rate.As far as the theory is given there are many argument about it.Aiming at explaining the phenomenon of departure from the PPP, Balassa-Samuelson effects theory is put forward and also plays an important role.In this essay it does some research work about the relationship between PPP and the Balassa-Samuelson effects theory and the test of the Balassa-Samuelson effects on the RMB real exchange rate.The first part of the essay mainly deals with what is the PPP and give a brief judgement of PPP.In the second part, following some research work between PPP and the Balassa-Samuelson effects theory,we can see that the two theories have some supplement relationship and consistencies.Based on the Balassa-Samuelson effects theory,we can draw a conclusion that Balassa-Samuelson effects theory is the correction for the PPP. In the third part,we make the test of studies on Balassa-Samuelson effects using panel data of 154 countries in the world.It can find the universality of the theory.And in the last part of this essay, we analyze the trend of RMB real exchange rate.Then we have a unit root test on RMB real exchange rate.According to the conclusion of the test we find that it is not obvious about Balassa-Samuelson effects on RMB rate at present.In the following part it gives some reasons for this. Integrate with the phenomenon of the accelerated increasing in value of RMB,we can get a conclusion that Balassa-Samuelson effects can use for explaining change of RMB real exchange rate in the long term.Besides,from Balassa-Samuelson effects theory we can be inspired into an idea that the accelerated increasing in value of RMB must base on the raising of labour productivity,and avoid the phenomenon of Sticky-Price Monetary Approach.