The Basic Time Series Model Of The Rmb Exchange Rate Behavior Description And Prediction

As an very important variable in the international financial field, the exchange rate determines the inner equilibrium of an economy, and it's outer equilibrium as well. Therefore, it is quite meaningful for the macroeconomic study of one country to learn the dynamic behavior of the exchange rate. Unfortunately, the existing research concerned for renminbi(RMB) is little. At present, the stiff exchange rate system in China,, little volatility of RMB's exchange rate, and inconvertibiliy of RMB under the capital account are the major factors which responsible for that. So, the real exchange rate of RMB is chosen as the objective of this study.Firstly, the international exchange rate theories are reviewed, on the basis of which one-variable autoregressive models of time series are put forward. Then, according to analyzing real exchange rate theories and the properties of RMB's real exchange rate, a linear autoregressive model and two nonlinear regime switch models are selected as tools for this research. Estimating these models, and fitting sample data lead to a conclusion that the smooth transition autoregressive model is the best one which describes the RMB's real exchange rate behavior well. Finally, these estimated models are used to forecast RMB's real exchange rate. Out-of-sample forecasts is extend to forward six steps. All outcomes imply that different-size and different-sign shocks have different influences on the dynamic behavior of RMB's real exchange rate due to the authorities's strict control over RMB's nominal exchange rate .