Research On Permanent Equilibrium Exchange Rates Of RMB

Since 2002, the RMB exchange rate has been faced with the pressure of appreciation, until early 2008, the market still has strong expectations for the appreciation of the RMB. Therefore, how to appreciate the extent and duration of appreciation in this process, as well as how to use policy to help the RMB exchange rate get balanced development are particularly important. Many scholars at home and abroad use the equilibrium exchange rate theory to measure the RMB exchange rate, but there are still some limitations.The permanent equilibrium exchange rates theory is one of methods to measure the exchange rate. It is based on other theories of equilibrium exchange rate and optimized by modern econometric method, so it has a certain practical significance for assessing the permanent equilibrium exchange rate. This paper discusses the status quo of the exchange rate of RMB, sets up a model by using error correction model. It gets a conclusion that the current real effective exchange rate of RMB is reasonable. This paper is divided into three parts: The first part is about the status of RMB exchange rate and the significance of the topic; it also makes a detailed summary of the permanent equilibrium exchange rates theory and the decomposition methods; the second part is the focus of this paper, it selects relevant data to establish a model of the permanent equilibrium exchange rates of RMB and estimates it; the third part gives recommendations to guide the formulation of policy.Under the pressure of the revaluation of RMB today, the conclusion of this paper is very useful: On one hand, the permanent equilibrium exchange rates model divide the economic factors into the long-term and the temporary, this provides a reliable basis to the formulation of exchange rate policy; on the other hand, it measures the RMB exchange rate by empirical analysis, and provide a theoretical basis for the adjustment of the RMB exchange rate.