Empirical Analysis On The Affecting Factors Of The RMB Exchange Rate Fluctuation

Since2000, the current account and capital account in china’s internation paymentcontinue to be surplus, and china exceed japan to have the biggest exchange reserves in2006.In2009, china exported more than germany to be the first goods exporter, and became thesecond world economy entity in2010. In recent years, the western countries met the impactsfrom subprime crisis and the debt crisis, and it was hard for their domestic economy, while theeconomy in china growed up rapidly. In this international background, trade friction andexchange rate disputes increase between china and western countries, which draw theattention to the rate of RMB exchange both in home and abroad.From2000to2003, opinions varied among domestic scholars as to whether the RMBexchange rate was too low or not. Some of them held the idea that the RMB exchange ratewas too low and should rised, while others objected this. As the imbalance in china’smacroeconomy became mor serious, especially with the rapid growth of china’s foreignexchange reserves, appreciation theory began to dominate since2004. In the discussion of thelevel of RMB exchange rate, domestic scholars carried broad and thorough research usingtheories and methods in western economy to whether RMB should appreciate, how much toappreciate and what influence it brought to our econmy if it appreciate. Though manyprovoking results occurred in this discussion, it still lack of systematic overall and corelationto china’s basic conditions in the research of RMB exchange rate.This paper mainly discusses the influence factors of RMB exchange rate fluctuation. Forthe factors include economic aspect, political aspect and psychological expetation as such,and these factors are no total independent, it becomes much complicated in the analysis offluctuation factors of RMB exchange rate. On june19th2010, the people’s bank of chinaadvanced in the reform of RMB exchange rate mechanism further according to china’seconomic situation and international payment, to enhance the flexibility of RMB exchangerate. So it becomes helpful to realize the dynamic management to RMB based on the marketsupply after we are clear about the direction and degree of influence factors of RMB exchangerate.The result in this paper shows the economic factors including entity economic factorsand monetary factors have a small influence on the elasticity of RMB exchange rate flutuationoverall, but the degree of influence grows as time goes by. Besides, due to china’s basicconditions and limitation on exchange policy, the analysis results and traditional theories ofexchange rate determination vary slightly, which need further modification and improvementin the policy level. The results from the research on both entity economy and monetary levelsuggests the amall deviation between actual effective exchange rate does exit. In the view ofoverall analysis, the actual effective exchange rate of RMB is still in the reasonable interval,so I don’t support the RMB exchange rate rises greatly in short term.