An Empirical Study Of The Equilibrium Exchange Rate Of Rmb

Since the reforming and opening of China, the imbalance or not of RMB exchange rate and the choice of RMB exchange rate system have been hot issues which the domestic and foreign scholars pay attention to. In the near future, should we continue to appreciate the RMB exchange rate, how should the revaluation scope determine as well as the RMB rate forms the mechanism reform direction. All of these problems are urgently awaits to be solved in China.The economic history tells us that either underestimate or overestimate of a currency's exchange rate can have the negative influence to the economic development, the larger of the magnitude, the greater can the potential harm be. Only when a country currency's real exchange rate is equal to the balanced substantive exchange rate basically, then its economic development will play a good role. With this basic issue, the paper firstly reviews the classical theory of equilibrium exchange rate. Based on all of these, it selects the Behavioral Equilibrium Exchange Rate Theory as a theoretical basis. With the collection of relevant economic data, empirical analysis of three decades of reform and opening to real exchange rate situation, combining with the actual situation of China's economic development, we analysis the misalignment of exchange rate of RMB on the overall economy. Our study found that:Firstly, the cointegration test results show that opening degree of economic, terms of trade, government spending, money supply and domestic interest to foreign interest rate are all facts that influent the real equilibrium exchange rate of the RMB. In these facts, opening degree and government spending have a greater impact. With 1% increasing of opening rate, 0.861338% of equilibrium real exchange rate depreciation will be caused; when government spending share of GDP increases 1%, the RMB's real exchange rate may appreciation 0.952710 percent.Secondly, in the context of reforming and opening, the RMB exchange rate's imbalance has been a normal situation from 1981 to 2010,and it has gone through three stages and three stages of the currency overvalued currency undervalued. Its underestimated extent of 1994 reached 24.8%, the highest since the reform and opening up to the maximum underestimate levels. The maximum Overestimate was 17.3% in 1989. RMB's exchange rate is lightly underestimated now.Thirdly, the RMB exchange rate has long been Chinese economy's adverse impact. In particular, after the 2008 global financial crisis, when western countries'economic faced too many difficulties, the demand for exports from China dropped sharply. of The disadvantages of over-reliance on exports to drive economic development are also apparent, and economic growth falls down. China is getting bigger and bigger faced with the economic growth way transformation and the economic structure reforming pressure.Theoretical and practical experience tell us that over the past thrity years, the RMB exchange rate misalignment caused by diverse factors, in which the RMB exchange rate formation mechanism plays a dominant role. China's RMB exchange rate formation mechanism reform road still has a long way to go. Currently the exchange rate of RMB is some real undervalued, faced with revaluation pressure. However, the international exchange rate of transformation of many lessons tell us that only incremental changes can ensure macroeconomic stability. Our country does not have the conditions that sharp appreciation of the RMB exchange rate needs, so gradually-appreciate strategy of RMB is a right way to China.Finally, the paper puts forward some proposals for reform of RMB exchange rate, such as China should gradually increase the flexibility of RMB exchange rate,and realizes in the advancement Renminbi interest rates liberalization's process will let the RMB exchange rate decide by the market.