Study Of RMB Real Effective Exchange Rate Misalignment On The Basis Of BEER Model

Exchange rate is the core of open economy, especially; the equilibrium exchange rate and real effective exchange rate have significant influence on the Internal and External Equilibriums. The real effective exchange rate, as an important variable concerning foreign affairs, attracts increasing scholars put efforts to study about it. At the same time, with the China affiliating WTO, the balance of trade surplus enhance to high level, especially after the sub-prime loan crisis in 2007 and Euro-liabilities crisis in 2009, the growth of Chinese economy, keep a high speed, leads to the exchange rate of RMB suffers lots of arguments, various Western country such as U.S.A employ myriad of ways to increase pressure to RMB exchange rate. Consequently, through the study of the real effective exchange rate and equilibrium rate could make us understand the system of RMB and the current misalignment.At first, this paper studies the conception of the exchange rate, and chooses the most representive variable: real effective exchange rate to study exchange rate misalignment, and by comparing the different method of equilibrium exchange rate estimation, decide to choose BEER method which was addressed by Clark and Macdonald(1998). On the basis of Beer method, This paper using ADF test, JJ conintergration test, impulse response function, variance decomposition, comes to the conclusion that the real productivity, the opening up degree'the terms of trade and the foreign exchange reserve are the exterminate indicator to real effective exchange rate, among the four variables, the real productivity has positive effect on the real effective exchange rate, and the others have the negative effect. In addition, the the effect of the open up degree and real productivity are more remarkable.Also, through the VECM model,it can be seen that the system of RMB exchange rate has the process to self-recovery, but the process always lags far behind and very slow. Secondly, the thesis calculates the current and permanent real exchange rate misalignment, concludes that the permanent misalignment is less than ten percent during the observed period; even sometimes the variable is impacted by external change dramatically. After that, the thesis also studies the reason and harmful influence when the exchange rate misalignment occurred. The thesis also tries to use grey predicting method to analysis the tendency of equilibrium exchange rate and found that the equilibrium exchange rate will stand steadily.At last, the article combined with the conclusion of empirical study, review the system of RMB exchange rate from 1980, analysis the problem of the system such as lacking consummate foreign exchange market, the weak elasticity of RMB exchange rate and the misusing of foreign reserve, then put up with serial suggestions to the further change of the system: try to set up a more effective system.