Research On RMB Equilibrium Exchange Rate And Its Misalignment

The exchange rate is an important factor for economic communication between countries, if it was unbalanced, The country’s internal equilibrium and external equilibrium are all affected, Especially for external equilibrium,then the equilibrium exchange rate is an important basis for checking whether the exchange rate is unbalanced. Nowadays, China has an important position in the international trade, Whether the real exchange rate imbalance seriously affect the economic relationship between China and trading partners, the equilibrium exchange rate issues has become a hot topic of many countries. Some western countries that trading with China think the exchange rate of RMB has been grossly underestimated in the past 20 years, if the exchange rate was undervalued Severely, it would make the trade deficit of these countries get more big and affect national economic development.Therefore, they urged the RMB exchange rate appreciated, however, if the exchange rate was appreciated excessively, China’s economy will also be affected, then whether the real exchange rate of RMB was undervalued excessively in the long term as western countries said? In this context, Estimating the equilibrium exchange rate and whether the exchange rate is unbalanced will be more useful.In this paper we firstly combed the exchange rate of relative term and the five mainstream theories of the equilibrium exchange rate, and choose the real effective exchange rate as interpreted variable in the empirical analysis, decided use the behavioral equilibrium exchange rate theory as the model base for the empirical study in the analysis of these equilibrium exchange rate theories. When we choose economic fundamentals as explanatory variables, we also considered the actual situation of China, like as the proportion of rural population. then using unit root test, the two-step of E-G and H-P filtering technology to calculate the equilibrium exchange rate of every year,Calculated the degree of imbalance of the exchange rate and analyzed the reasons in different stages.The empirical result shows:Trade openness, net assets abroad, government spending and the proportion of rural population with the real effective exchange rate has a long-term steady and negative relationship, the influence of net assets abroad is the largest. The exchange rate of RMB has two underestimate, two overestimate and closed the long-term equilibrium exchange rate for once. The exchange rate was unbalanced in most of the time, the degree of imbalance is even more than 10% in some years, such as the exchange rate of RMB is underestimated by 13.14% in 1994, and overestimated by 12.13% in 1998. Then based on the empirical result and the purpose of adjusting the exchange rate imbalance, we put forward the policy Suggestions to improve the misalignment of the exchange rate of RMB in these four aspects of the currency markets, the exchange rate of RMB formation mechanism, the way of domestic economic development and the capital account convertibility.