Rmb Real Exchange Rate Equilibrium Disorders

Exchange rate is the money exchange ratio of two countries. It's of great significance for a country's economic development whether the exchange rate is reasonable or the exchange rate system is suitable. In recent years, the RMB exchange rate has been praised by the focus of attention, and the mainly focus is if the level of RMB exchange rate is undervalued. Whether the RMB exchange rate is proper or is underestimated, one of the effective methods to measure and judge it is undoubtedly the equilibrium exchange rate. In order to estimate the RMB equilibrium exchange rate and to judge the degree of the RMB exchange rate misalignment, the paper adopted the behavior equilibrium exchange rate model (BEER), selected the quarterly data from the first quarter of 1994 to the second quarter of 2010 and renewed related variables to make the empirical research of RMB equilibrium exchange rate and to measure its misalignment. In this paper, the main research results are:1,Factors such as the labor productivity of trade product versus non-tradable products, trade conditions, net foreign assets, trade policy, rate gap and change of the exchange rate system all affect the long-term equilibrium exchange rate of RMB, The differences are the different direction and degree among different variables.2,the real exchange rate of RMB from 1994 to 2010 did exist certain degree of misalignment, the specific performances are as follows. From the first quarter of 1994 to the second quarter of 1996, the real exchange rate of RMB was undervalued; from the third quarter of 1996 to the first quarter of 2003, the real exchange rate of RMB was overvalued; from the second quarter of 2003 to the first quarter of 2008 the real exchange rate was undervalued; since the second quarter of 2008, the RMB real exchange rate changes back and forth around the equilibrium exchange rate.3,Seeing either from the change trend of the long-term equilibrium exchange rate or of the RMB's actual long-term exchange rate, It will not be changed that the RMB exchange rate is upward in the long term. The ultimate driving force behind the revalue trend is from China's stronger economy. However, factors such as the increase in foreign reserves, the rise of the labor productivity in trade product department are also important driving forces to real exchange rate appreciation of RMB. On this basis, this paper will present some focalized policy suggestions as conclusion.