Research On Impact Of RMB Equilibrium Exchange Rate On China's Agricultural Product Trade

In recent years, appreciation of the RMB exchange rate has repeatedly become the focus of attention at home and abroad. The exchange rate is an important regulator of international trade. China's foreign trade will inevitably have been affected with the RMB exchange rate changes. Agriculture is the foundation of a country's economy, the agricultural trade is an important part of a country's foreign trade. Since 2004, China's agricultural trade balance has transformed into a deficit phase from a continuous surplus phase. The impact of exchange rate on agricultural product trade also has become a hot issue of domestic and foreign scholars'research. Equilibrium exchange rate, which has become one of the core issues of the exchange rate theories, refers to a exchange rate that enable make the a country's international income and expese balance.The article firstly estimates the RMB equilibrium exchange rate and extent of exchange rate misalignment of the year from 1983 to 2009 by choosing labor productivity, terms of trade, trade openness, broad money supply and net foreign assets as the basic economic fators which affect equilibrium exchange rate and extracting the long-term equilibrium value of each variable with HP filtering method. The calculation results show that in the study year, the RMB real effective exchange rate fluctuates around the RMB equilibrium exchange rate, has been overestimated and underestimated. The overestimated years occur in 1983 to 1985, 1997 to 2003 and 2008, 2009, and the underestimated years occur in 1986 to 1996, 2004 to 2007. Among the years, the most serious overestimated years occurs in 1983 to 1985, the highest rate reached 24.64%, and the most serious underestimated years occurs in 1987 to1988, 1993 to 1994, the highest rate reached 24.17%.Based on estimating the RMB equilibrium exchange rate and by constructing the linear model between the RMB equilibrium exchange rate and China's agricultural product import and export trade, the article empirically analyses the impact of RMB equilibrium exchange rate on China's agricultural product import and export trade using cointegration test, error correction model, impulse response function, variance decomposition and Granger causality test methods. The research results show that there are long-term equilibrium relationship between the RMB equilibrium exchange rate and China's agricultural product import and export trade, but the impact of RMB equilibrium exchange rate on agricultural product import trade is much larger than that on agricultural product export trade. In the long term, the coefficient of elasticity is 1.794710 between the RMB equilibrium exchange rate and China's agricultural product import trade, and it is 0.354519 between the RMB equilibrium exchange rate and China's agricultural product export trade. Marshall-Lerner condition is met in China. The contribution of RMB equilibrium exchange rate to agricultural import is more than 40%, but the contribution of RMB equilibrium exchange rate to agricultural import is only 2% to 7%. In the short term, the impact of RMB equilibrium exchange rate on agricultural product import and export trade is not significant.Finally, based on the results of theoretical and empirical analysis, the article puts forward some countermeasures and suggestions such as China should improve the RMB exchange rate formation mechanism, the government should give a reasonable guide to the agricultural products import and export and give appropriate policy support to agricultural products industry, agricultural enterprises should strengthen the awareness of preventing the exchange rate risk and improve their core competitiveness.