Long-run Equilibrium Exchange Rate Of RMB Decision Theory And Empirical Research

As an important tie of the domestic and foreign economiy,exchange rate is playing an increasingly important role in China's foreign economic exchanges.Since China's Central bank introduced the floating exchange rate system which based on market and referred to the policy of"a basket of currencies",the problem of how to decide the best range of the equilibrium exchange rate of RMB has become very significant.This paper firstly analyzes the evolution of the rate system of RMB and the present situation.Secondly,by combining with our country's actual situation in 1980-2007,selecting the seven major economic variables which affects the long-run equilibrium of RMB,the model of the long-run equilibrium exchange rate of RMB estimated by the single equation,and cointegration test and HP filter analysis on the basis of the caculation and dislocated analysis of the long-run equilibrium exchange rate of RMB,this paper work out the equilibrium value of the long-run equilibrium exchange rate of RMB. All these discussions are based on the actual theory model of developing countries.Finally,this paper makes these conclusions:the actual effective rate of RMB fluctuates around the long-run equilibrium rate;the long-run equilibrium rate of RMB is influenced by labor productivity,conditions of trade,actual money-supply,the net foreign assets,the rate of investment,the inflow of foreign capital as well as the degree of openness of the trade at different levels.In the end, this paper advances some suggestion on the reform of rate system of RMB basing on these conclusions.