Study On The Impact Of RMB Exchange Rate Fluctuation On China’s Import And Export Trade

Exchange rate,as a monetary tool of adjusting foreign markets,plays the role of transforming and measuring price in international investment activities and foreign trade,and it also is an important economic leverage in adjusting international trade balance of a country.Therefor the change of exchange rate has an important impact on the balanced and steady development of a country’s import and export trade.In the four decades since China started the first round of exchange rate system reform in 1978,China’s exchange rate system has basically achieved the goal of marketization of the RMB exchange rate through four rounds of reform and refreshing.In the meantime,the development of China’s international trade has realized the transformation from trade deficit to trade surplus and increasing surplus,additionally it also has showed a high growth trend after the exchange rate reform in 2005,so China’s position in the global economic trade has been rising.However,since 2015,China’s economic growth has gradually changed from the original high-speed growth mode to the "new normal" economy mode of medium-high growth.Various economic indicators show a downward trend,and the development of import and export trade is inevitably affected.Simultaneously,in the future China’s import and export trade will be faced with severe domestic economic conditions,such as supply-side reform,the elimination of backward production capacity,increasing risks of exchange rate uncertainty with the deepening of RMB marketization,as well as complicated foreign environments,such as the rise of trade protectionism in Europe and the United States,unstable economic conditions for the rotation of political parties in Europe.In such a context,from the perspective of exchange rate fluctuations,it is of practical significance to study how to maintain the balanced and stable development of China’s import and export trade,keeping China’s economic growth steady under the promotion of international trade.Based on the theoretical framework of international trade balance,this paper systematically investigates the relationship between exchange rate fluctuations and China’s import and export trade from the two aspects of exchange rate level changes and exchange rate volatility.Firstly,this paper summarizes the basic theory of exchange rate fluctuations impacting on import and export trade,the definition of related exchange rate concepts and relevant literature studies at home and abroad,so as to provide a basic theoretical framework for the subsequent research of this paper.Secondly,using the statistical analysis method,this paper combs the basic situation of RMB exchange rate change and China’s import and export trade from three aspects:the development process of exchange rate system,the trend of RMB real effective exchange rate and the general situation of China’s import and export trade.Thirdly,through the econometrics principle,the impact of exchange rate changes on China’s import and export trade is empirically analyzed.The process includes:First of all,the EGARCH model is established to measure the RMB exchange rate volatility.and then,considering the influence of GDP,FDI and other factors on import and export trade,and establishing the models of import trade and export trade based on the incomplete substitution model.In addition,ADF test and co-integration test were conducted on all variables.After the test results were passed,regression analysis was conducted on the import trade model and export trade model from four aspects to obtain the impact of exchange rate fluctuations on import and export trade.Above all,the Granger causality test is made for the import trade equation and the export trade equation.After passing the test results,the impulse response function analysis is carried out for the import trade equation and the export trade equation based on the VAR model,and the short-term effect of exchange rate fluctuation on import and export trade is obtained.The empirical research part ends.Finally,on the one hand,based on the empirical research,several conclusions of exchange rate fluctuations impacting on China’s import and export trade are obtained.RMB exchange rate level Change is negative on China’s import trade,but the concrete manifestation of this influence in the short-term is first positive then negative effect,and RMB exchange rate level Change is negative on China’s export trade.RMB exchange rate volatility is positive on China’s import trade,but the effect is weak.RMB exchange rate volatility is negative on China’s export trade.On the other hand,based on the overall research of this paper,several revelations are obtained,such as,promoting the progress of RMB internationalization;improving the RMB exchange rate mechanism and keeping exchange rate volatility within an reasonable range;increasing the awareness of exchange rate risks among Chinese import and export enterprises and encouraging them to use financial hedging tools reasonably;promoting China’s supply-side structural reform as to fundamentally enhance the international competitiveness of our products.