The Effects Of RMB Exchange Rate On Bilateral Trade

In recent years, the nominal exchange rate of the RMB against the U.S. dollarhas been in an appreciation trend,and China’s exports and imports also have beenincreasing at the same time with the trade surplus expanding each year.To explorewhether the RMB exchange rate movement has a significant impact on China’s importand export and how it works are what this paper try to find out. In this paper, The dataof Sino-US and Sino-Japanese billingo trade from July2005to December2013ischose to be the sample,cointegration method and vector error correction model areused in the empirical analysis. The exchange rate level and its volatility are used inthe empirical model. The empirical results show that both equations of Sino-US tradehave long-term equilibrium relationship.The export equation of Sino-Japanese tradealso has a long-term equilibrium relationship,but the import equation does not. InSino-US trade, exchange rate depreciation decrease exports and increaseimports,while in the Sino-Japanese trade, exchange rate depreciation increase exports,thus the exchange rate adjustment can effectively improve China’s exports to Japan,but can not improve the situation of Sino-US trade. The impact of short-termfluctuations of the exchange rate is not significant in all three models.The effect ofshort-term fluctuations of the exchange rates volatility on import and export volume isnot significant, but in the long term it promotes them although the impact in not sogreat.