Study On The Terms Of Trade Effect Of RMB Exchange Rate Fluctuation

Since the reform of the exchange rate mechanism,China's exchange rate has gradually entered the volatility range,showing greater volatility.As one of the factors affecting foreign trade,the impact of exchange rate fluctuations on China's foreign trade can not be ignored,while the terms of trade are usually used.To measure the changes in the interests of a country's trade reflects the state of a country's foreign trade,which is particularly important in bilateral trade.In recent years,the trend of changes in China's terms of trade has become more apparent.This can,to a certain extent,reflect the changes in China's trade situation.Therefore,under this premise,the study of the effects of trade conditions on exchange rate movements is very theoretical and practical.Significance.The relationship between exchange rate and terms of trade has an important significance in trade,and it is also one of the hot spots studied by scholars.In view of this,this article mainly considers the relationship between exchange rates and terms of trade as the entry point,the China's Net Barter Terms of Trade Index and the Income Terms of Trade Index as the object of investigation.With exchange rate as the main explanatory variable,China's general terms of trade and terms of trade of primary products trade and terms of trade of industrial products are selected.Collect trends and empirical analysis of the quarterly data from 1999 to 2016 of each variable,and study the degree of impact of RMB exchange rate changes on China's terms of trade,and provide reasonable suggestions for improving China's Terms of Trade..The first chapter of the article begins with a systematic description of the topic selection background of the article,and sorts out the literature on the study of the relationship between RMB exchange rates and terms of trade by scholars at home and abroad,and then conducts a comprehensive review,through a review of the literature.After combing and reading to understand the progress of the current study on changes in exchange rates and terms of trade,the second chapter of the article analyzes the trends in terms of trade.Regarding the trend of the general terms of trade,the terms of trade for primary products and manufactured goods are directly analyzed through trend charts,and elaborated and then the direct cause of this change trend is sought and analyzed.The third and fourth parts of the article are the mechanism analysis and empirical part of the impact of exchange rate on terms of trade.For the mechanism analysis,the article considers that the impact of exchange rate on terms of trade is divided into direct and indirect effects,and the indirect effects are also interpreted in three aspects as the quantitative effect and the cost effect and the structure effect.The empirically selected variables are mainly China's terms of trade(including Net Barter Terms of Trade and the Income Terms of Trade of total,primary product,industrial product)and the RMB exchange rate,while the three variables of economic growth rate,foreign direct investment,and industrial structure exist as control variables.The data mainly comes from the statistics of the Bank for International Settlements,the China Statistical Year book and the Ministry of Commerce.It is concluded that the variables are tested for stability,cointegration tests,Granger causality analysis,Impulse response analysis and robustness tests.The article summarizes the conclusions of the study in four points: First,the increase in the nominal effective exchange rate will improve the Terms of Trade.Net Barter Terms of Trade of general and industrial products,the Income Terms of Trade of primary products have a significant role in promoting except for the effect on the Net Barter Terms of Trade of primary products.The lagged effect of the nominal effective exchange rate on terms of trade shows that the nominal effective exchange rate is conducive to improving the terms of trade,but the impact on the general Income Terms of Trade and Income Terms of Trade of industrial products will be inhibited after the eighth period.Second,economic growth(Using the GDP growth rate to express)has an impact on Net Barter and Income Terms of Trade.A unit of GDP growth rate will cause the Net Barter Terms of Trade of general and primary products to deteriorate,and the overall Terms of Trade of income and primary products will improve.The prices of industrial products and the income terms of trade are all promoting roles.Third,foreign direct investment has no significant effect on the Net Barter terms of trade,but it has a significant improvement on the overall Terms of Trade of income and industrial products.Fourth,the industrial structure,that is,the increase in the ratio of the secondary industry to the GDP will make the Net Barter Terms of Trade improved,but it will make the Terms of Trade of income and primary products worsen.Based on the research conclusions,the article puts forward five specific suggestions on how to improve China's terms of trade,including improving the existing exchange rate mechanism,advancing the process of RMB internationalization,changing the driving force for economic growth,strengthening the guidance of foreign direct investment,and promoting the industry.