Balancer Of The Exchange Rates Between Chinese And Thai Currency

With the rapid development of trades between China and Thailand, the Chinese government and the Thai government have focused on two main issues. One issue is determining the exchange rates between Chinese and Thai currency in the future and the other issue is the reasonability of the historical changes of such exchange rates. In the past years, the Chinese government amended the RMB (Renminbi) Exchange Rate System several times based on the exchange rates between RMB and USD (American Dollar). As parts of these amendments, the modifications of exchange rates between RMB and THB (Thai Baht) were based on the exchange rates of USD and RMB and the exchange rates of USD and THB. In this case, it is possible that the exchange rates between RMB and THB were irrational. If the exchange rates are not rational and marketable, it will lead to trade distorting effects and violation of the fairness principle.Currently, the globalization of RMB is at a significant stage. At this stage, the importance and influence power of RMB is experiencing serious challenges. One challenge is the risk of external interference. At the same time, the development of China-ASEAN (the Association of Southeast Asian Nations) Business District has brought opportunities of cooperation and developments for both Chinese and Thai governments.According to the literature research, most researchers tested the nationality of exchange rates based on the purchasing power parity theory. However, as the employed quantitative methods varied, the conclusions varied. Purchasing power parity theory has been proved to be valid in testing the rationality of exchange rates, which is also an important assumption of this research. This research aimed at providing comprehensive evaluations of the balance of exchange rates between RMB and THB in multiple aspects, from the perspective of purchasing power parity. The historical trends of exchange rates were separated to three stages, regarding to the different characteristics of the trends in stages. The Co-integration Analysis and three-factor Model were adopted in quantitation. The Co-integration Analysis was adopted to analyze the relationships between the normal rates of exchange and the real rates of exchange between RMB and THB. The real rates of exchange were determined by relative purchasing power parity. The three-factor model was adopted to analyze the relationships between the rates of exchange of RMB and THB and the consumer price indexes of China and Thailand. Finally, based on the conclusion, the recommendations and suggested policy were provided, in order to improve the determination of exchange rate between RMB and THB effectively. These recommendations and policy will provide theory and importance to the further development of trades between China and Thailand.