| In achieving steady and rapid growth of GDP, China has been accumulated huge foreign exchange reserves by foreign trade and FDI, thus leading to a serious imbalance in the external economy, the pressure on the appreciation of the RMB is still. On the eve of London G20 summit, Zhou Xiaochuan, Governor of Central Bank, proposed to establish an International Currency to replace the USD, has caused a very great international response and it appeals to reform the current International Financial System. One ultimate outcome of the G20 summit is to expand the right to speak of China and other emerging economies in the IMF and other International Organizations; it shows that China's comprehensive national strength, meanwhile, the issue of RMB Exchange Rate also be pushed to the fore. But how is the Real Effective Exchange Rate of RMB and its degree of volatility, its impact on China's economic growth effect and how is the operation of the Chinese economy since June 2005, when the formation mechanism of RMB Exchange Rate has been reformed. As the discussion of the issues on RMB's internationalization, there's many close attention from all walks of life on the long-term trend of RMB's balanced Exchange Rate and how to raise the weights of RMB in the International Currency basket.In this paper, first, it would like to focus on a brief analysis of the impact of China's macro-economic indicators since the RMB Exchange Rate formation mechanism reform in June, 2005, due to the shorter hours of the reform, and the existence of Time-delay effect of the impact of various economic indicators on the overall economic, the Granger causality test is not significant, but this did not affect the results of this article. And second, it would like to build a theoretical model on the Economic Effects of Exchange Rate and its fluctuations in a macro-economic framework, and revaluate the Real Effective Exchange Rate of RMB based on the CPI index and establish a BEER model of it, at the same time, estimate its fluctuations. This paper makes an Empirical Test of Real Exchange Rate and its fluctuations of economic effects, the test results are basically consistent with the theoretical model. A very important finding of the study is: the misalignment of Real Effective Exchange Rate of RMB has a statistically significant positive effect on the import and export trade, and this is very important both theoretically and practically, that is the use of Exchange Rate Policy Tools to adjust foreign trade and, ultimately, to achieve the objective of macroeconomic adjustment is useful, however, the empirical analysis has fade the direction of the misalignment of real effective exchange rate and the running of the economy itself is very complicated, this paper believes that it needs to be care when the monetary authorities use the Exchange Rate Policy Tools. On the basis of good understanding of several basic concerns, from the perspective of the use of the short-and long-term policy package in order to achieve the purpose of macroeconomic growth is the rational choice that is the conclusion of the paper and corresponding policy recommendations. |
