The Empirical Study On The Influence Of RMB Real Effective Exchange Rate On Terms Of Domestic Manufactured Goods

Currency exchange rate is a unit of currency exchange rate to other countries.It isthe most important comprehensive price index in the international economic activities,implementing a price conversion function in the international finance and internationaltrade activitity.The exchange rate determines the relative priceof a country engaged inthe international trade of goods and services.So it will inevitably affect the terms oftrade.As the deepening market reform of exchange rate of China,the changes mustreflect the international monetary market and the real needs of commodity markets,causing the relative price ofimports and exports.It will change the terms oftrade.As a meas~e of benefit of a country participation in international trade,terms oftrade are important indicators.They can me~ure the status of international trade of acountry,reflecting the intemationaI trade interests in the distribution. China has implemented reform and opening up since 1 978.Foreign trade has beendriving economic growth of China for many years.Moreover,terms of trade in China have not improved,this is a problem offoreign trade ofChina.Compared with the primary products,industrial products in the international trade of China occupy a higher proportion,manufactured goods terms of trade are directly related to trade interests.This paper studies the real effective exchange rate of RMB on China trade ofmanufactured goods.This paper introduces the basic concepts and theories,including the exchange rate type,the terms oftrade and trade interests and effect mechanism ofexchange rate to the terms oftrade.It provides a theoretical basis ofthe mpirical analysis.Then,the paper analysis the size and structure of manufactured goods And the terms of trade ale calculated,estimating the price terms of trade and income terms of trade.They Can comprehensively meas~e the manufactured goods trade interests. Using the Johansen cointegration test,Granger causality test,impulse response and variance decomposition,the paper measures empirical analysis of real effective exchange rate terms oftrade for manufactured goods and income terms oftrade.Finally, the paper gives trade policy recommendations on how to improve the terms of manufactured goods trade.According to this analysis,we can get the following conclusions:(1)Before 2005, the price terms of manufactured goods in China is deteriorating.Since 2006 the price terms of trade have improved,but the improvement is limited;revenue terms of manufactured goods are continuing to improve.(2)Trade interests in manufactured goods continues to increase on t11e results of price terms 0f trade for manufactured goods and income terms of trades and combining with the structure of imports and exports of manufactured goods.(3)The real effective exchange rate Can affect the price of manufactured goods trade and income terms of ffade significantty,and the apprecimion of theRMB haS worsened NBTT and ITT,while affects NBTT more significantly.