The Rmb Exchange Rate Influencing Factors Research In China

RMB exchange rate at the mid-1990s era of the last century experienced the firstmarket-oriented reforms, along with the continuous deepening of China’s economicreform and opening up, after several decades of development, the importance of theexchange rate has become increasingly prominent. The face of the pressure of RMBappreciation, the central government in July2005a significant reform, changes involatility cause for concern. In this paper, a method of combining qualitative andempirical analysis, begin by reviewing the traditional exchange rate theory andempirical research, the lack of traditional exchange rate theory and relevant literaturereview of research. Secondly, we study the main factors to affect China’s RMBexchange rate in China’s exchange rate system reform. Again, from the perspective ofempirical analysis of national income, the international balance of payments, foreigndirect investment, foreign exchange reserves, money supply, inflation rate as theinitial variable to build the VAR (vector auto-regression model) structure of theexchange rate factor theory model this model not only the exchange rate, foreignexchange reserves, money supply, the national GDP, the actual utilization of foreigndirect investment as mutual conduction between the endogenous variables, but also toexplain their mutual influence relationship as the information of the same period.Analysis to draw an important factor affecting the RMB exchange rate shouldbe for the international balance of payments, foreign exchange reserves, foreign directinvestment, money supply, national income according to the exchange rate theory andthe actual situation in China. Drawn by the VAR model, the impact of China’sexchange rate long-term changes in the most important factor is the money supply,followed by gross domestic product (GDP), foreign direct investment and foreignexchange reserves. Drawn through the variance decomposition (contribution analysis),China’s exchange rate short-term changes in the main by its greater impact, followedby gross domestic product (GDP), foreign exchange reserves and foreign directinvestment. Can draw the following conclusions: Empirical Analysis of China’s GDPgrowth or not showing the relationship between the reverse changes to the country’sexchange rate changes; showing the same relationship to the changes in the moneysupply, changes in the country’s foreign exchange reserves and the country’s exchangerate changes; actual use of foreign showing the same relationship to the changes in theamount of direct investment in change and the country’s exchange rate changes.