The Effect Of Real Exchange Rate On Economic Growth: Theoretical Analysis And Empirical Study

In recent years, the RMB exchange rate has been concerned by academic and practical community at the domestic and abroad. The focus of the issue is that whether the change of real exchange rate promotes or restrains the economic growth. Until now, no matter theoretical analysis and empirical study didn't gave the accordant answer, no matter the study on a group countries and a single country didn't got coherent conclusion. These analysis states that whether the change of real exchange rate promotes or restrains the economic growth maybe also depend on other economic characters.The objective of this paper is to provide theoretical analysis and empirical study on the effect of the change of real exchange rate on growth. This paper at first reviews the theoretical and empirical literature. Then, the theoretical model of real exchange rate affect economic growth was constructed, and discussed the influence of external debt, the terms of trade to the relationship of real exchange rate and economic growth. On this base, this paper conducted the empirical research of them and discussed the external debt, the terms of trade affect this relationship using statistical data. At last, according to the conclusion of theoretical and empirical research, this paper discussed the reference of the conclusion about how to establish a reasonable exchange rate policy.The results of this paper make clear that, no matter middle-high income countries and low-middle income countries, currency devaluation is conducive to national economic growth,but the effects are different. The more proportion of external debt, the smaller of the devaluation of the growth effects; The greater the proportion of government consumption, the smaller of the devaluation of the growth effects; For the low-middle income countries, the greater the proportion of imports, the smaller of the devaluation of the growth effects; the more improvement in terms of trade, the smaller of the devaluation of the growth effects; the lower of the real interest rate, the greater of the income countries, the greater the proportion of imports, the smaller of the devaluation of the growth effects; the more improvement in terms of trade, the smaller of the devaluation of the growth effects; the lower of the real interest rate, the greater of the devaluation of the growth effects. Based on the above conclusions, this paper consider that China should follow low level of exchange rate , lower the real interest rate,the proportion of external debt and imports should be lowered, so that they can benefit the growth effects of exchange rate.