Rmb Equilibrium Exchange Rate Determination And Empirical Analysis

It will lead to economic efficiency decline and social welfare loss, no matter whether exchange rate of a country is overvalued or undervalued, then economic crisis can be triggered by careless abandon. Therefore, some countries claimed that the undervaluation of RMB exchange rate induced the financial crisis and called on China government to appreciate RMB exchange rate. Well then, are there any inappropriateness of China's exchange rate policy or RMB exchange rate, and any undervaluation existence? Equilibrium Exchange Rate Theory, which one of core exchange rate theories, is an important theoretical basis that could determine whether exchange rate policy or exchange rate level should make an adjustment. Consequently, author builds a proved model of RMB breakeven exchange rate based on ERER(Equilibrium Real Exchange Rate), which analysis based on equilibrium exchange rate of developing countries, after studying pertinent literature at home and abroad, extracting the more important factors affecting equilibrium exchange rate, combining China's related actual situation. Firstly, the author made some qualitative analysis that how various indicators influence RMB real exchange rate, which cover China since reform and opening-up and American. Secondly, the author made some empirical analysis of model, thus extrapolate real exchange rate model and calculate level of RMB exchange rate misalignment.According to research and analysis, make the following conclusion:(1) Over 30 years since reform and opening-up, there are OPEN and DFFRD have positive effect on RMB exchange rate level, and TOT, NVR and TRRS are negative factors.(2) After the exchange rate reform in 1994, influence coefficient of change rate of RMB exchange rate has changed, which from proportion of TRRS and GDP and NVR change rate. Effect of TOT change rate on rate of change of RMB exchange rate has become large, while impact of DFFRD change rate on rate of change of RMB exchange rate has declined gradually.(3) With analysis of Degree of the RMB exchange rate misalignment, the author made a conclusion that since reform and opening up, RMB exchange rate has experienced three times overvaluation, respectively, and two times undervaluation. But in recent years, the RMB exchange rate misalignment made less in degree, which shows that our ability to control RMB exchange rate gradually increased and formulation of the RMB exchange rate is also more reasonable.(4) Since 2006, to the present, the misalignment rate of RMB exchange rate was maintained at less than 7%. And hence the misalignment rate of RMB exchange rate level is conform to international convention in recent years, and formulation of the RMB exchange rate is reasonable.