The Impact Of Economic Shock On Real Exchange Rate Fluctuation

Astoday’s developed countries have stepped into slowdown trend, while emerging economies have played much more important role. With the development of globalization, it is not only the competitive relationship between countries, but also cooperation.And in the transactionsof goods or funds among countries, the exchange rate plays a key role. However, how to know the determination of the exchange rate has always been a thorny issue plaguing the academia.In addition, the real exchange rate, which has been eliminated the influence of inflation between countries, is the focus of theoretical researches. It also shows the performance of international competitiveness for domestic goods. In many researches on the influence factors of the real exchange rate, the “economic shocks” is the prominent factor to the exchange rate volatility. For now’s globalization and marketization, the knowledge of the economic shocks will certainly be the key to understand the changes of economic variables.On the basis of previous studies, this paper builds the SVAR model to study the responses of real exchange rate to supply shocks, demand shocks and nominal shocks, real shocks. According to their actual economic situation, this paper summarizes the significance of the impact to those economic variables and explained the difference between the long-term and short-term.Having been tested by the method of stationarity and cointegration, the empirical results reflect that the effect of real shocks and demand shocks on the real exchange rate is significant and lasts for long. Besides, in long time, the nominal shocks and monetary shocks have little impact on the real exchange rate. In order to prevent the overreaction of real exchange rate to economic shocks, we use methods from real and demand variables to regulate our economy.