The Rmb Exchange Rate Changes Affect The Analysis Of The Chinese Trade Balance

Exchange rate is the most important comprehensive price index used in international economy transaction and executes the function of transforming price. So it becomes the most important lever of regulating trade balance. Therefore many countries take exchange rate as an adjustment instrument in order to regulate trade balance. The effect of exchange rate is more and more apparent.This paper reviews the related theories and documents of the effect of changes of rate on trade balance. And then, on the basis of analyzing the effect of changes of real effective exchange rate on our country's trade balance, this paper mainly aims at assessing the effect of real effective exchange rate by means of combining qualitative methods and quantitative methods. Quantitative methods include ADF, Granger causality test and ordinary least squares. This paper draws conclusion as followers. Firstly, | η* + η] | >l,our country' s import and export goods conform to the Marshall-Lerner condition. If RMB depreciate, trade balance can be improved. Secondly, η* is evident and RMB depreciation may promote export greatly. Because of negative 7 and poor elasticity import, RMB depreciation can't restrain import. Thirdly, the J-curve effect of RMB should be within one year. Fourthly, R-squared between RMB and import & export is a little poor. Exchange rate is not leading factor for our country's import and export. Fifthly, by comparing the conclusion of the other scholar to my conclusion , η* and η are increasingly apparent with time going .Finally, this paper makes comments and gives some suggestion on the basis of above analysis. From now on, we should pay more attention to exchange rate especially real effective exchange rate. But we should not change exchange rate frequently. It is no necessary that we make RMB depreciate in order to improve trade balance only. Currently we may make RMB appreciate so as to reduce price of import goods for promoting import. On the other hand, RMB appreciation may restrain the tendency of price rising for adjusting real effective exchange rate and trade balance.