The Stabilizing Effect Of RMB Exchange Rate On China's Economic Growth:An Empirical Study

With the deepening of financial innovation and the improvement of financial freedom,the division between the various levels of money supply is increasingly blurred,the currency multiplier is no longer stable,and the effectiveness of the money supply as an intermediate goal is continuously declining.In contrast,the exchange rate can better meet the criteria of the intermediate goal of monetary policy: the central bank regulates the exchange rate,the exchange rate has good controllability;the effective exchange rate is easy to obtain,which can effectively reflect the general level of the exchange rate,and the exchange rate also has good predictability.Therefore,starting from the relevance of the exchange rate as an intermediate goal,this paper discusses the role of the RMB exchange rate in economic growth.First,a qualitative analysis of the interaction between exchange rate and economic growth is conducted.Then descriptive statistical analysis of the stable relationship between exchange rate and economic growth under the three scenarios is carried out,which include full sample,before exchange rate reform,and after exchange rate reform.Then,according to the quarterly data from the first quarter of 1995 to the third quarter of 2017 is a sample,using unit root test,Granger causality test,Johansen cointegration test,vector autoregression model(VAR)and other methods,the impact of exchange rate on economic growth under three scenarios is measured.The empirical results show that: 1.The RMB exchange rate is inversely related to economic growth and the relationship is positive and causal.2.The RMB exchange rate changes have a significant impact on economic growth.Under all three scenarios,the results show that the appreciation of the RMB will restrain economic growth,and the impact under the scenario after the exchange rate reform will be even greater.The real effective exchange rate of the RMB increases by 1%,the economic growth rate of the entire sample will fall by 0.25%,the economic growth rate before the exchange rate reform will fall by 0.18%,and the one of the exchange rate reform will fall by 0.51%.3.The impact of the RMB exchange rate on economic growth is asymmetric.The RMB exchange rate can be considered as an alternative intermediate goal for currency control.