A Empirical Research On Capital Productivity And Rmb Real Exchange Rate-the Extension Of The Balassa-samuelson Effect

As an important indicator in modern economic system, exchange rate plays a extremely significant role on Macroeconomic. On July 21, 2005, China made a reform on its exchange rate system:instead of pegging the Yuan against Greenback with pegging to a basket of currencies, introduced managed floating exchange rate system based on market supply and demand. Since 1997, the Yuan has exited the fixed exchange rate system which is showing a unilateral appreciation trend in nowadays. The main reasons of appreciation pressures which RMB nominal exchange rate are facing are from both abroad and domestic. From the experience of foreign history, we have reasons to believe that the developed countries represented by the United States and Japan require an appreciation of the Yuan; the strong dollar policy and foreign trade friction make the pressure of RMB appreciation continued to heat up. From the side of domestic economic growth, China's economic strength has caused an appreciation in RMB real exchange rate, while the real exchange rate is the internal driving force to the nominal exchange rate, and thus China's rapid economic development strengths the pressure on the RMB nominal exchange rate appreciation.As the volatility and the frequency of RMB nominal exchange rate gradually increased, the impact on social economy has gradually expanded. Usually the nominal exchange rate only reflects the currency exchange ratio, while the real exchange rate can do better in reflecting a country's actual economic performance. This paper sorts out the relative existing literature and makes a systematically theoretical analysis on the Balassa--Samuelson effect. The paper also makes an empirical study on RMB real exchange rate based on theoretical analysis of extended mode which introducing capital productivity of tradable goods and non-tradable goods. The processed basic data was to unit root test and co-integration test, by examining, the paper made a regression Analysis on determinants of RMB equilibrium real exchange rate based on extended model. The empirical results shows:Through the unit root test, the author finds that the selected data are first-order single whole, Therefore, co-integration test used to determine whether there is long-term stable relations between these non-stationary time series data, and the co-integration test results show the existence of co-integration for the selected data. Through regression analysis, the positive and negative symbols of the explanatory variable coefficient are consistent with assumes of the extended model for the Balassa--Samuelson effect and pass the test of significance; in other words, there is a significant linear relationship in the equation the author build. By Analysis of variance we finds that China's relative labor productivity and the US's relative capital productivity play even more important roles in these four explanatory variables, which is exactly in line with the status quo. Thus the extended model of Balassa--Samuelson effect significantly set up in China. Finally, based on the empirical conclusion we can find that if we could properly evaluate the Balassa--Samuelson effect, we can effectively prevent the RMB exchange rate being overshoot, improve the productivity of service, ease the pressure of RMB appreciation. In order to avoid exchange rate fluctuations reasonably, the policy of exchange rate we make should be all-round considered.