Study Of RMB Exchange Rate Problems And Countermeasures

In the background of Chinese economy more closely involved in the international economic activities, economic exchanges deepened and GDP growth, the exchange rate has become an important economic variable, became an important link of international economic relations. Almost all of the international economic activities are related to the exchange rate. An open economy’s development and exchange rate system are inseparable. Since 2005, our country implemented the managed floating exchange rate system, which based on market supply and demand with reference to a basket of currencies, the RMB exchange rate issue has become an important topic in the international economy. How to estimate the equilibrium exchange rate of RMB effectively, estimates RMB exchange rate misalignment, reasonably estimates currency trend, for the healthy development of China’s foreign trade and the national economy, has important theoretical and practical significance. This paper reviews classic exchange rate determination theory of western economics, in order to determine the effects of basic economic factors of exchange rate of a country. On this basis, the author analyzed the classic exchange rate theory, determine the level of economic growth, balance of international payments(including Current account balance and Capital account balance), the inflation rate, the amount of foreign exchange reserves, the dollar and the RMB interest rate difference,RMB monetary supply of seven fundamental economic variables as explanatory variables of RMB exchange rate, confirmed the RMB exchange rate model by empirical analysis. This paper draws the following conclusions based on theoretical analysis and empirical Analysis:(1) the seven explanatory variables all have impact on the fluctuation of China’s exchange rate, but only the Capital account balance, RMB monetary supply, the amount of foreign exchange reserves and the dollar and the RMB interest rate difference are most important, and they’re also significantly.(2) Base on direct quotation, the exchange rate and Capital account balance presents the positive correlation; RMB monetary supply, exchange rate and the amount of foreign exchange reserves and the dollar and the RMB interest rate difference is inverse correlation.