The Analysis Of Factors Affecting RMB Real Exchange Rate

Under the trend of economic globalization, Economic ties between countries become more and more closely. Real exchange rate as a measure of a country’s purchasing power and competitive variables is constantly high valued. The existing research on the real exchange rate influence factor mainly from two aspects:firstly, some decompose real exchange rate and make the theoretical and empirical analysis about the real exchange rate from the perspective of non-tradable elements on the condition that traded goods prices obey the law of one price. The famous Balassa-Samuelson effect and Froot-Rogoff effect is classic interpretation for the theory of exchange rate changes. Secondly, others do not decompose real exchange rate, explore the influential factors of the real exchange rate and the transmission mechanism from the overall level, for example, the real interest rate parity theory, it thinks if the country’s real interest rate higher than foreign, the overall prices of the country will rise relative to the foreign, that is the real exchange rate of the country appreciate. However, research and analysis about the real exchange rate from the perspective of the relative price factors of traded goods based on the structural decomposition of the real exchange rate is little. In consideration of the lack of this research, this paper use RMB real exchange rate as the research object, chose the 1994-2014 countries or regions available data around the world, to decompose real exchange rate in different price index respectively and to graphic analyze the relationship between movements in relative price of traded goods and RMB real exchange rate. Then we empirical analyze the the influence factors of RMB real exchange rate from the angel of relative price of traded goods based on the regression between RMB real exchange rate and non-tradable elements. The conclusions obtained in this paper are as follows:firstry, the movements between the relative price of traded goods and RMB exchange rate is more closely, the change of the relative of traded goods will affect RMB real exchange rate. Secondly, the money supply、the balance of payments and the real per capita GDP have a significant impact on RMB real exchange rate. The increase in the money supply and per capita real GDP growth in China relative to foreign will lead to RMB real exchange rate appreciation, but the increase of the relative balance of payments will make RMB real exchange rate depreciation. Thirdly, it will produce the deviation if we ignore the influences of the relative price of traded goods during the research of influence factors of RMB real exchange. According to the results of the study, finally, we give the following suggestions:firstly, in the study of the real exchange rate, we must not ignore the impact of the relative price influence factors of tradable goods on real exchange rate. Secondly, with the development of economy in our country, the government should control the money supply strictly, and must pay attention to the effect of the balance of payments on RMB real exchange rate that is unsustainable.