The Impact Of Sino-Japanese Exchange Rate Variations On Bilateral Trade With A Vehicle Currency

With the development of the world economy,the trade relationship between countries becomes closer,in which exchange rate plays a very important role.In international trade,exchange rate is a comprehensive price index of national foreign trade,which has function of price conversion and adjustment of international trade balance,and it regulates the balance of domestic and foreign trade and build a bridge for the trade between countries.Japan is one of the countries closely related to China in economic trade and it has been conducting trade with China for many years because of its geographic advantages.The history of trade exchanges with Japan is the history of Chinese economic reform and opening up,during which China's economy has developed rapidly and Sino-Japanese bilateral trade has undergone a change of ups and downs.The exchange rate of two countries which effected by the policy and international environment is constantly changing,especially since the reform of Chinese exchange rate system,Chinese international trade has grown fast and exchange rate variations are also more obvious.Therefore,it is meaningful to study the impact of Sino-Japanese exchange rate on bilateral trade after the reform of Chinese exchange rate system.In the study of the relationship,the scholars represented by Franke(1991),Clark(1973)and Willett(1986)have different viewpoints,and they conclude that exchange rate fluctuation has positive correlation,negative correlation and irrelevant conclusion for bilateral trade.There is no definite answer to the relationship because of the influence of research methods,data selection and time selectionBased on the previous research results,this paper uses the quarterly data from 1994 to 2016 to deduce the gravity model through the supply and demand model,and joins the vehicle currency in the gravity model to avoid the inverse causality and ensure the one-way nature of the research.On the basis of this,the author uses cointegration relation test mode and error correction model.The final conclusion is that the relationship between the RMB exchange rate and export trade to Japan is not significant before the reform of exchange rate system but positively after the reform of exchange rate system;the relationship between the RMB exchange rate and import trade from China to Japan is negatively before and after the reform of exchange rate system.While the relationship between the yen exchange rate and both export trade and import trade from Japan to China is positively before and after the reform of exchange rate system.We generally believe that the rise of the exchange rate and currency devaluation will stimulate export trade,the decline of exchange rate and currency appreciation will increase import trade.The conclusion of the test is not identical with this viewpoint.The author considers the reasons for the trade structures and the trade agreement between the two countries.In the error correction model,the error correction term is negative,which will bring the fluctuation of short-term explanatory variable back to the long-term equilibrium relationship.On the basis of empirical research,the author puts forward some suggestions,such as speeding up the marketization of RMB exchange rate,reforming the structure of import and export trade,and improving the political relations between the two countries.