The Effect Of Volatility Of RMB Exchange Rate On Regional Export

With the collapse of the Bretton Woods system in1973, the countries in the world gave up the fixed exchange rate regime one after another in favor of the floating exchange rate regime, which made the exchange rate of the developed and developing countries’ legal currencies take on lager volatility than that in the period of the fixed exchange rate regime. The growth speed of the world trade also slowed down obviously. The fluctuation of the world’s major currencies’exchange rate had an influence on the international trade to a certain extent. Since then, the international theory field was beginning to realize the important relation between the exchange rate volatility and international trade, which motivated the theory and empirical study on this aspect.In view of China, the exchange rate of RMB had being pegging to the U.S. dollar for a long time before the exchange rate reform in2005, which shows little volatility. However, on the background of the exchange rate reform in2005and the international crisis in2008, the exchange rate of RMB gradually takes on an increasing volatility. The exchange rate risk is beginning to emerge. China also starts to pay attention to the effect of the exchange rate volatility on international trade. China is a typical export-oriented country, and Jiangsu Province plays an important role in China’s export, so this paper is to study the specific circumstance of Jiangsu Province in order to learn more clearly the mechanism that the exchange rate volatility affects the regional export, and to give some suggestions consistent with the actual situation of China and Jiangsu Province according to the experience of Jiangsu Province.This paper is divided into five parts. The first part is the introduction. Based on the background that the RMB exchange rate volatility increases after the exchange rate reform in2005, this part puts out the main study content of this paper:the effect of the RMB exchange rate volatility on the regional export. The second part is the literature review. This part summarizes the main theory of the effect of the exchange rate volatility on international trade and some related empirical results at home and abroad. The third part is the measurement of the RMB exchange rate volatility. This part gives a brief introduction of the history of the RMB exchange rate formation mechanism, sums up the estimation techniques of the exchange rate volatility, and presents this paper’s method. The fourth part is the empirical study, researching on the relationship between the RMB exchange rate volatility and Jiangsu Province’s export. The fifth part concludes the paper and gives some suggestions.This paper mainly wants to explore the effect of the exchange rate volatility on export. Choosing Jiangsu Province’s two largest trading partners-U.S. and Japan as the sample countries, the paper points out the measurement method of the exchange risk according to some related theory and abstracts the relative exchange rate volatility. Then the paper makes use of the general export model on this aspect in the theory filed to explore the short and long term relationship of the bilateral trade, the importing country’income, the RMB bilateral real exchange rate and the corresponding exchange rate volatility. After the analysis, the paper concludes as follows:the exchange rate has a significant negative impact on the export of Jiangsu Province to the U.S. in the long term, but the impact of the exchange rate on the export is very weak in the short term which is not statistically significant. As for the export of Jiangsu Province to Japan, they are not related with the exchange rate volatility in the short and long term. Finally, the paper points out that with the deepening of the RMB exchange rate reform, an increasing exchange rate volatility will become a long term trend. Because of this, the exchange rate should be adjusted under the premise of the stability and the appropriate range in order to control the exchange rate risk effectively, avoiding the lager impact of the exchange rate volatility on China’s and Jiangsu Province’s export, which has a positive significance on remaining China’s economy stable and healthy.