The Influence Of RMB Exchange Rate To The Balance Of Trade Of China

This paper start from the the puzzle of adjustment of exchange rate in internationaltrade,using putting forward questions, analyzing problems, solving problems as the trainof thought.We want to put forward new explanations for the puzzle of adjustment ofexchange rate through the exchange rate pass-through perspective. This paper argues thatMarshall-Lerner conditions is built on the premise that the law of one price, but theprice in the real economy law is not necessarily true, from the point of view that theexchange rate is not completely transfer, incompletely transfer of exchange rate is notestablished the Marshall-Lerner conditions, thus affecting the exchange rate adjustmenton the trade balance.Then starting from two angles of microcosmic and macroscopic,explains the reasons of incomplete exchange rate pass-through. The microscopic aspectmainly use PTM as the theoretical basis, price discrimination, market share, substituteproducts, sunk cost are the main cause of the PTM phenomenon,also including non taxbarriers and the Multi-National Corporation internal transactions. The macro aspectsincluding inflation environment, the local pricing currency, exchange rate system, Thedegree of financial development as the affect exchange rate pass-through factors.we use the data after the reform of exchange rate in the empirical test, respectively,analysis on exchange rate and trade balance of merchandise categories. Fixed effectsregression model showed that exchange rate changes significantly affect the trade balance,and satisfy the Marshall-Lerner condition, but its influence coefficient is low, theestimated elasticity of exchange rate pass-through is only about60%, which alsoconfirmed the previous analysis theory, the exchange rate is not fully passed. This alsoexplains the question--the exchange rate adjustment of mystery, because of incompleteexchange rate pass-through. In this paper, we make a reasonable policy suggestions basedon the above analysis.