The Effect Of RMB Exchange Rate Changes On Domestic Economic Development

As the economy of the foreign proportion of total economic output accounts for more than 60%, exchange rates fluctuating is an important factor of domestic prices and macroeconomic system. The reform of exchange rate system will play an important effect on our future economic development. Particularly in recent years, as the continue change of domestic and international economic and political factors and the last revaluation, the influence of RMB exchange rate to our economic growth also gradually apparent. The goal of the text is to adopt the latest statistics, from the perspective of comprehensive long-term development, comprehensively survey the effect of exchange rate changes on domestic economic variables relevantly, and provide some suggestions to reforming of our exchange rate system.On the basis of the analytical and empirical analyses in theory, this paper deeply analyze the mutual influence of the level of exchange rates and exchange rate stability of China's economic growth. The focus research of the paper is empirical study. We use exchange rates, the net export trade, foreign direct investment and gross domestic product etc., with the time sequence data from 1985 to 2010.In the basis of VAR model, using the econometrics technology of Granger causality tests and the function of impulse response, we test the effect of the level of real exchange rate and its stability to economic growth and to the relationship between. Finally, according to the study of theories and empirical results, on the basis of Chinese economic situation we give some suggestions to the Chinese institute reasonable exchange rate policy.Research shows that the level of exchange and China's economic growth has a closely two-way relationship. On one side, in the way through the net export trade, the level of exchange play an distinct role in economic growth by trading channels, although still not obvious, but with the expansion of trade balance, it will bring greater impact. On the other side, in the way through foreign direct investment, the level of exchange rate also has an more obvious impact on economic growth. However, judging from current data it cannot draw the conclusion that GDP has an obvious reaction to the level of exchange rate. Exchange rate stability and the change of economic growth also has an two-way relationship, so exchange rate stability has an obvious impact on the situation of China's economy. In the present economic situation, to the extent of international economic perspective, the relationship of exchange rate and economic growth must exist. Therefore, it is necessary to further improve the exchange rate system, such as moderately expanding the fluctuating range of RMB exchange rate to establish a more flexible RMB exchange rate mechanism, and put the RMB exchange rate in the foreseeable stability, that the exchange rate system will promote the development of our stable economy.