Exchange Rate Determination Theory And The Rmb Exchange Rate Empirical Analysis

Foreign exchange rate refers to the ratio of converting different currency, which plays the role as a lever to balance economy both interior and exterior as one of the most important tools in international finance and trade. The level of foreign exchange rate directly affects resource allocation, balance of international payment and sustainable national economy development. Therefore, from the beginning of international economic communication, a great importance has been attached which resulting in various theories of foreign exchange rate determination. The article includes analysis and opinions on those theories of great influence and applicability. It lays emphasis on statistical analysis, verification and latest development. According to the development of exchange rate determination theory, it can be classified as the classic exchange rate and the modern exchange rate determination theory. The classic exchange rate determination theory includes the theory of purchasing power parity and the theory of interest-rate parity. The modern exchange rate determination theory includes the capital market method of exchange rate determination theory, the speculation foam theory, the news model and the chaotic model.Based on above mentioned content, the author made a profound analysis on the new foreign exchange rate determination theory founded by Professor Pan Guoling in "The Theories of International Finance and The Techniques of Quantitative Analysis". The theory is a significant and creative work, integrating western theories and domestic condition.The author made a demonstration on RMB long term par rate with the new foreign exchange rate determination theory calculating rates in different period. It is proved by verification that the theory is feasible, clarifying if the rate is over estimated or less estimated.In the author's opinion, the unbalance of RMB at present is not so cheerful. The forming mechanism must be improved soon. The RMB rate should be determined by market to allow reasonable adjusting. The RMB rate interval fluctuation mechanism should be started at a appropriate time to demonstrate the RMB rate interval fluctuating mechanism, which is favourable for our country to establish a harmonious, stable and sustainable developing international circumstance. However, in short term, to maintain the economic sustainability, stability and health, RMB rate should not appreciate rapidly.