The Research On The RMB Equilibrium Exchange Rate

Exchange rate, an important parameter of the internal and external economy of a country, is a critical consideration to lay down the economic policies, measure the state of economical operation and attain the economic profits. With the global economic integration, the formation of exchange rate is a complicated process decided by political, economical and financial factors of many countries.Equilibrium exchange rate, the core content of exchange rate theories, is a standard to judge whether the exchanged rate in one country is overvalued or undervalued. Since the reform of RMB exchange rate, governments and scholars have debated over the forming mechanism of RMB exchange rate and how to set a reasonable exchange rate standard effectively. The reasonable exchange rate standard plays a vital part in the effective allocation of resources, because it is not only related to the sustainability of the external balance of a country, but also a necessary guarantee of the stability and sustainability of macroeconomy of a country. Therefore, it is of great significance to study the RMB exchange rate in terms of Chinese economy.First, this paper briefly introduces the literature review about the study background, significance and researches home and abroad and gives a brief introduction to the basic concepts of exchange rate, the developments of equilibrium exchange rate and RMB exchange rate mechanism. Then, the paper carries an empirical study on RMB equilibrium exchange rate through constructing a simple equation model based on the traditional BEER model. And it studies the factors affecting the RMB equilibrium exchange rate from1996to2012and the extent of imbalance of exchange rate. This paper adopts the research method of qualitative and quantitative, contrast and induction. The originality of this paper lies in choosing total factor productivity instead of GDP as the standard to measure the economic development, thus getting the percentage of RMB exchange rate imbalance. And with the use of H-P filter analysis it analyses the effects of all the factors on the RMB equilibrium exchange rate in the long term and indicates that it is a common phenomenon of imbalance due to the real exchange rate fluctuating with equilibrium exchange rate. Last, the paper analyses the influence of RMB real exchange rate misalignment on Chinese macroeconomic balance, and gives some suggestions to improve the imbalance of RMB exchange rate.