An Empirical Research On The Spillover Effect Of Exchange Rate

Recently, due to the gradual strengthening of China’s dominant influence and the expansion of policy coverage, China’s exchange rate policy has become one of the most controversial part of 21st century international macroeconomics. Especially, under the recent influence of the undervalued demand for the RMB and high unemployment and excess capacity which industrial countries is experiencing, China’s exchange rate policy has increasingly become an international focus. Some scholars in Japan and Europe and other developed countries take some reasons as argument to ask for RMB’Ss appreciation, such as "China, especially Asian countries to the global output of deflation", "China needs the U.S. manufacturing industry is shrinking, companies going bankrupt, unemployment is a serious charge of, "China has attracted worldwide economic imbalances ".At the same time, many scholars in China hold the opposite view, they believe the RMB exchange rate is relatively reasonable, the RMB has not been underestimated or in other words, RMB is overrated practically. Against this background, what impact will the change of RMB against the U.S. dollar exchange rate result in other countries as well as to what the extent of that impact will be, direct impact on our country and the smooth flow of trade with other countries, is a major research topic on which should both the theory apartment and practice sectors of domestic and foreign do In-depth study.From the perspective of an open economy’s rate spillover theory view, based on the mainstream literature, this paper takes on the combination of qualitative and quantitative analysis methods to do the in-depth study on the significance and pattern of the exchange rate’s spillover effect, to prove when there is a change in the real exchange rate of RMB against the U.S. dollar, how the trade between China and other countries changes, and to what extent of the impact the change will cause. This, and then make such a conclusion to explain the meaning of reality and significance. The conclusion of this paper will explain the reality as well as guide future.This paper has some innovation in the research perspective a. Firstly, on the research This paper find that the previous studies only takes the direct effect into consideration when do the research on the changes in currency exchange rates between two countries will led to what changes in the trade value of the other countries. The direct effect is the corresponding import substitution due to the consumer price elasticity effects when the exchange rate changes. This paper take the indirect effect during the process of exchange rate changes into consideration creatively. The indirect effect is the expansion or shrink of import of importing country resulting from the changes in national income, which is realized when exchange rate exchanges under the Marshall-Lerner condition. To distinction, the former direct effect is called the spillover effects and the latter indirect effect is called the multiplier effect. Such innovation not only provides a new idea to study the spillover effects but also make the final regression more reliable.