Trend Of The Euro Against The Yuan Exchange Rate Fluctuations Based On Time Series Models

The European Union is one of the major economic entities in the world, and the countries of the Euro zone are important partners in trade and investment. The fluctuating of the EURO exchange rate has relationship to our country's long-standing development. This paper analyzed the short and long term trend of fluctuation of the EURO to RMB exchange rate with the normative and empirical analysis.According to the research which domestic and foreign scholars concerning with, this paper found that the time series model of the quantitative analysis methods has its own advantage over the others. So this paper systematic analyzed the EURO to RMB exchange rate fluctuation trend by the time series model. First of all, the trend of the exchange rate was reviewed and analyzed from 1999. Based on the conclusion, the fluctuation feature of the EURO to RMB exchange rate is analyzed by the GARCH model, the trend of exchange rate was forecasted by the Markov model and the most possible range was confirmed. Then we used the ANN model to forecast the exchange rate which is in the range to prove that the model is exact, then we use the ANN model to forecast the exchange rate which is in the range. So the decline trend of the EURO to RMB was found. According to the conclusion of empirical research, combined with the unstable factors such as the financial and economic situation of European Union, the policy selection of the European Central Bank and whether the Grate Britain Pound would join the Euro zone, the EURO to RMB exchange rate was forecasted. We considered the factors containing the balance of payments, money supply, economic growth rate, interest rate, foreign exchange reserve, Central Bank power in the exchange rate fluctuation in China are better than the European, so we think the EURO to RMB exchange rate will be fluctuating in high level in the short term future and then turn down in 3 to 5 years.Finally, based on the result of above analysis and forecast, this paper pointed out that the decrease of RMB exchange rate against Euro would lead to deterioration of international balance of payments, the acceleration of the capital outflow, reduction of employment opportunities, price inflation, exacerbation of the international reserve and so on. So the policy suggestion such as adjusting the trade strategy, enlarging the trade range, optimizing the structure of imports and exports, adjusting the exchange reserve and keeping away the exchange rate risk by financial instruments were tabled.