An Empirical Research On Balassa-samuelson Effect Of RMB Exchange Rate

The People's Bank of China announced that starting from July 21, 2005, China would implement a regulated, managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies,and from then on the exchange rate of RMB is no longer pegged to the US dollar. Since then, the movement of the exchange rate of RMB is in constant appreciation, and has unilateral revalue trend. At present, a strong expectation of RMB appreciation still exists on domestic and international market, and the expectation has two reasons, the one reason is from the international perspective, such as external pressure such as political opinions from the United States and Japan, the adjustment of strong dollar policy and the friction of foreign trade, the other reason is from the China's economic growth, the changes of the real exchange rate is the inner driving force of the changes of nominal exchange rate. Since 1978, with the global economy increasing fusion, our country has experienced long-term fast economy growth, and this situation is similar with the hypothesis of the Balassa-Samuelson Effect. Therefore, from the perspective of the Balassa-Samuelson Effect to discuss and study on the exchange rate of RMB is a hot research subject.The paper begins with the theoretical origin of the Balassa-Samuelson Effect, introduces the two-sector division of Ricardo's viewpoints, the theory of Purchasing-Power Parity, the difference of productivity, reveals the theoretical root of the Balassa-Samuelson Effect, researches the internal logic and theoretical implication of the Balassa-Samuelson Effect. The paper systematically analyses and studies the original models of the Balassa-Samuelson Effect. Then, based on the research of the Balassa-Samuelson Effect, the paper makes an empirical analysis on the model of the Balassa-Samuelson Effect of RMB, by using the data of the China and the United States from 1990 to 2008 and considering the first industry and the secondary industry excluding the construction as the tradable section ,others as non-tradable section for the China, and considering agricultural, manufacturing and mining as the tradable section, others like construction, service, oil wholesalers, finance &insurance, retail and government institution as non-tradable section in China for the United States. Then, the paper analyses the condition of the China and the United States by using chart and co-integration test, and to find that whether the condition is according with the hypothesis of the Balassa-Samuelson Effect, and then the paper tests the Balassa-Samuelson Effect by unit root test, Johansen co-integration test , VAR model and impulse response function. At last, the paper point out that the exchange rate of RMB will face with the appreciation pressure in the long-term, and put forward some relevant suggestions to release the pressure, such as deepening market reform on the exchange rate of RMB and improving the productivity of non-tradable section with service industry.