The Influences Of RMB Real Efficient Exchange Rate Fluctuation On China's Trade Balance

Fluctuation of RMB real efficient exchange rate can lead to a country's financial assets price change directly and guide the international capital flows,thereby influence a country's sustainable development of trade.Firstly, this paper analyses the basic theory about the influences of the exchange rate fluctuations on foreign trade:Elasticity analytical method,and focuses on Marshall-Lerner Condition and J-curve Effects.Then analyze the effect of changes of real effective exchange rate on our country's trade balance by means of combining qualitative methods and quantitative.This paper adopts the monthly survey from Jan. 2000 to June 2005,and establishes empirical model,adopt the modern econometric method to do the quantitative research:firstly through the ADF unit root tests to test whether steady about time series data or not,then adopt Johansen cointegration test to estimate whether cointegration exist between them or not to the time series exist unit root.Finally through the Granger causality to test whether they can influence by each other between RMB real efficient exchange rate and our country's trade balance or not. The following result as follow:there is no long-term steady relationship between RMB real efficient exchange rate and our country's trade balance because of our country's distinct economic structure.The reason as follow:first,the change on our country's trade patterns.second, part of import commodity exist rigidness.third, optimization of our export commodity's structure.fourth,the influence of our country's trade policy.fifth,the comparative advantage which led by low price of labor elements.sixth, non-tariff barriers and other factors.Finally, according to the result of the qualitative and quantitative analysis,this paper makes comments and gives some suggestion: adjustment of the RMB exchange rate should be kept small, slow, gradual trend; control the scale of foreign exchange reserves and promote the rational use, it will not only to offset inflation partly but also can ease the pressure of RMB appreciation;strengthen the ability about enterprises to handle exchange rate risks.