Empirical Analysis Of The RMB Exchange Rate Fluctuation’s The Impact On The Economic Development Of The Northeastern Region Of China

Throughout the process of the RMB exchange rate changes, we found thatChina has been the implementation of the de-facto pegged to the U.S. dollarexchange rate system for a long time until China’s trade surplus and foreignexchange reserves continue to expand, and at the same time the internationalChina’s monetary authorities announced they will reform the formation mechanism ofthe RMB exchange rate. Since then, the RMB exchange rate entered a continuedgradual appreciation track, although the RMB exchange rate from2008to May2010return to a strategy of pegged to the U.S. dollar, due to the U.S. subprime mortgagecrisis triggered a global financial tsunami in2007. With the improvement of theeconomic situation at home and abroad, the central bank announced, on June19,2010,to restart the reform of the formation mechanism of the RMB exchange rate. FromJanuary2002to June2012, The RMB appreciation against the dollar has appreciatedfrom8.27to6.32or so.Traditional macroeconomic theory consider that: a country’s currency exchangeincrease, resulting in the decline in exports and. In addition, due to exchange rate appreciation, the price of imported goods decreases and the imports increasesresulting in the deterioration of the current account, and finally making the economyin trouble. As China’s economic structure has been heavily dependent on externaldemand, China’s foreign trade import and export volume dropped sharply, along withthe RMB continued appreciation and the real economy has also been a certain degreeof drag when the U.S. subprime mortgage crisis in2007triggered the global financialtsunami resulting in the tightening of global aggregate demand. At the same time, theimport and export of China’s important economies in the region-the Northeast region,knowledge a greater impact, and along with the financial crisis and the apprecia tionof the RMB exchange rate, the total import and export volume of the northeast regionexperienced negative growth in2009.At present, the scholars study on the relationship between Foreign trade,economic growth and exchange rate fluctuations mostly concentrated in the overallsituation of China’s foreign trade and the foreign trade developed provinces. Thereisn’t any study on the relationship between foreign trade, economic growth of China’seconomies in the region and exchange rate fluctuations, especially the traditional oldindustrial bases in Northeast China.This article studies on how the exchange rate fluctuations impact on the foreigntrade of Northeast China and what kind of impact mechanism between the exchangerate fluctuations, foreign trade and economic growth of Northeast China and thenanalyse the opportunities and challenges we will meet in the external economicenvironment. In the empirical analysis, based on the data from1995to2012, this article usesthe export and import equation and ECM model to analyse the short-term and long-term relationship between the RMB exchange rate, import and export commodityprices, foreign trade policy, national income, import and export volume of thenortheast region. Generally draw that the RMB exchange rate formation mechanismreform have had a greater impact on the import and export trade of the Northeastregion. Then, the article builds a VAR model based on data of the national income,wages, price level, the real exchange rate, fiscal spending a nd social consumer goodstotal retail sales from1994to2012, and uses the impulse response function to analysehow the REER affect other variables in the macroeconomic system. At last, theresults show that in the short term the appreciation of the real effective exchange ratehas a negative impact on the economy in Northeast China.