The Empirical Research On The Enhancement Of RMB Exchange Rate's Influence On China's Foreign Trade

As essential constituent part of price system, exchange rate will exert important influences on a county's foreign trade because its fluctuation can change the comparative price of import and export goods. With the termination of the Bretton Woods System, the fixed exchange rate system has gone to the end. Before china's reform, the amount of trade is relatively small. The fluctuation of the exchange rate has little impact on our import and export. However, with the development of the Society, things have changed a lot. Especially considering the fact that China's entry into WTO, the fluctuation of the real effective exchange rate will have more influence on China's import and export.In this article, we discuss the influence of the real effective real exchange rate on China's import and export both theoretically and empirically. There are five sections in this article.In the part of instruction, it mainly concerns study background, content, method, value of this article. In the first section, basic exchange rate theory, exchange rate arrangement, and related exchange rate concepts have been discussed there.In the second section, reviews all the Chinese stages that how the adjustment of exchange rate influence foreign trade on the basis of the theory analysis, and compare the actual data of import and export trade volume and REER from 1994 to 2007 to observe and the import and export movements caused by the increase of RMB exchange rate.In the third section, a new REER index is constructed, and has an empirical research by some quantitative methods. Quantitative methods include ADF, Granger causality test and JJ test. This research draws conclusion as follows: The whole absolute value of import's price elasticity of demand and export's price elasticity of demand 5.37 is more than 1 which conforms to the Marshall-Lerner condition. If RMB depreciate, trade balance can be improved. The influence of real effective exchange rate's fluctuation on Chinese import and export is prominent.In the fourth section, we studied how and to what extent the real effective exchange rate influence our trade term.In the fifth section, the article makes comments and gives some suggestions on the basis of above analysis.