Research On Spillover Effect Of The Exchange Rate Of Renminbi

The exchange rate of one country has an linkage with other countries’.AS an important macroeconomic variable, the exchange rate have a crucial role in regulating the economy,it is not only have an impact on the domestic economy may also have an impact on the economy of other countries.Since the reform and opening up, China increased the openness of the exchange rate of RMB, various countries take more attention to the balance of payments and other issues, particularly.,some developing country require the appreciation of Renminbi. If this issue can not be carefully dealt with, it would intensify the contradiction between countries, and then cause the competitive currency devaluation. This paper will have a research on this issue from the angle of the spillover effect of RMB exchange rate. First establish an analytical framework to identity the relationship between changes in exchange rates and the export of other countries through the establishment of the equation, and then select RMB nominal exchange rate and economic trade data of Malaysia, the Philippines, Thailand, Singapore, Indonesia, South Korea, Brazil from 2000 to 2012, establish VAR model to do empirical research.Through co-integration test, granger causality test and impulse response analysis, concluded that if there is a appreciation of 1% of the RMB exchange rate,the exports of other countries will be increased by 0.08%-0.22%. It shows that the exchange rate of RMB have spillover effects on other countries. If there is greater competition with China, the spillover effects of the exchange rate of RMB will greater; if the elasticity of substitution of export commodities greater, the spillover effect will be greater. Therefore, the relevant authorities should take a cautious approach in the development of the exchange rate policy, it is necessary to consider the country’s macroeconomic targets, it also important to take care of the economies of other countries, let the exchange rate of Renminbi have a slight and steady appreciation. We should take the advantage of the spillover of Renminbi exchange rate, so that we can get the maximum economic benefits. At the same time, in order to ease the pressure of RMB7s appreciation., we should strengthen trade relationship with developing countries and improve the quality of the export goods.