Rmb Exchange Rate Equilibrium Disorders And Adjustment

The Chinese economy has been integrated into the international open economic system since the reform and opening up for more than 30 years. Some economic issues on the open economy theory will be inevitably put forward during the process of economy development, especially exchange rate issues , which is the core point in the open economy. Given upon the huge influence of Chinese economy on the world economy system, the motion of RMB exchange rate will have significant influence on Chinese economy as well as world economy. Recently, RMB exchange rate has been the hot topic by the media,political circles and academic circles domestic and overseas, especially the reasonable level of RMB value and underestimated value of RMB exchange rate that has been always criticized by western developed countries , putting pressure on the appreciation of RMB exchange rate. Given upon this, first, this paper has a review about the development condition of the equilibrium exchange rate theory and academic fruit on the empirical analysis of RMB equilibrium exchange rate by the scholar at home and abroad. Second, based on the equilibrium real exchange rate theory and real Chinese economy being in the transition stage ,this paper structure the RMB equilibrium exchange rate model that reflect the fact of Chinese economy and some primary economic indicators having influence on RMB exchange rate are picked up. Third, given the annual economy data from 1980 to 2009, it builds up several empirical analysis models to test the level of RMB exchange rate as well as the condition about maladjustment of RMB exchange rate and the self-adjustment efficiency of RMB exchange rate.Based on the empirical analysis, the important conclusions of this paper will be as followings: (1) Related economic time series having influence on RMB exchange rate includes NFA,TOT,DE,R_POD,R_GAP and OPEN. At the same time, NFA,DE and R_POD have the positive relation with RMB exchange rate in the long time, and TOT,R_GAP and OPEN have negative relation with RMB exchange rate in the long time. (2) The maladjustment of RMB exchange rate has taken place nearly five times during the sample period. RMB exchange rate was overestimated from 1980 to 1985 and from 1996 to 2002 respectively; RMB exchange rate was underestimated from 1986 to 1988,from 1990 to 1995 and from 2004 to 2009 respectively; And the level of RMB real effective exchange rate was basically equal to the level of RMB equilibrium effective exchange rate from 1989 to 1990,from 1995 to 1996 and from 2003 to 2004 respectively. (3) The function of self-adjustment system on RMB is not strong and effective. According to the two error correction models, the coefficient of error correction are -0.24 and -0.35 respectively, which shows that the function of self-adjustment on RMB exchange rate do exist but works ineffectively. Lacking of elasticity on the RMB exchange rate system,imperfection of pricing system,imbalance of economy structure and so on could account for the phenomenon. Last, this paper, combining with the current fact of Chinese economy, put forward some proposals in terms of perfecting the rate-forming mechanism of RMB,mechanism of pricing and relevant measures to address how to avoid maladjustment of RMB exchange rate in the long time.