The RMB Exchange Rate And The China-US Trade Under The Background Of Economic Integration

If we study the relationship between exchange rate and international trade, we could not leave the four major theory of the balance of payment (BOP) alone, especially the Marshall-Lemer condition in the Elasticity Approach of the theory of BOP. The classical Marshall-Lerner condition studies the relationship between exchange rate and international trade in the circumstance of two countries. On this basis and through appropriate modification, this paper draws a conclusion of the second generation Marshall-Lemer condition in the circumstance of three countries and the third generation Marshall-Lemer condition in the circumstance of multiple countries.Next, this paper studies the third generation Marshall-Lerner condition by the empirical analysis of panel vector auto-regression (PVAR) model. The empirical result support the conclusion of the mathematical model, which is the most essential factor to affect the export and import is the inertia effect of the trade itself, and the effect of exchange rate is less compare with that of trade.This paper at the same time restudies the four major theory of BOP by the method of modern econometrics, and draws the following conclusion:first, the J-Curve Effect in the Elasticity Approach of the theory of BOP still exists, but the influence is very little, and it could not improve BOP. Second, the Multiplier Approach in the theory of BOP may not be correct, because the influence of income to import trade is very little and the net impact approaches zero. There’s not obvious increase or decrease to import trade when the income increase. Third, we estimate the uncertain part in the classical Absorption Approach of the theory of BOP, which is the BOP surplus is less than the BOP deficit due to money devalue. Fourth, the Monetary Approach in the theory of BOP is correct under our research, but the influence is also very little.After that, this paper study the second generation Marshall-Lemer condition by the empirical analysis of vector auto-regression (VAR) model. The empirical result supports the conclusion of the mathematical model and draws the following conclusion of the China-US trade under the influence of the third country:first, the American domestic economy is the most essential factor to affect the China-US trade, and the effect of the Chinese domestic economy is less than that of American. Second, it’s unreasonable to focus on RMB exchange rate only while neglecting the exchange rate of Yen and Euro when we study the China-US trade. The exchange rates of Yen and Euro have the same influence on China-US trade compare with that of RMB exchange rate. Third, the major reason of the imbalance of China-US trade is that the US demand for Chinese market is much larger than its export to Chinese market when American economy grows. At last, this paper gives some policy suggestion.