Study On Equilibrium Exchange Rate Of RMB According To BEER Model

Exchange rate level whether appropriate, is essential for a country’s economicdevelopment. Exchange rate misalignment will have an important impact on a country’seconomy, and want to determine the degree of exchange rate disorders, we need to determinethe equilibrium exchange rate.This paper first introduces the concept of these two sets of nominal exchange rate and theactual exchange rate, equilibrium exchange rate and exchange rate misalignment. Then, sortout the theory of equilibrium exchange rate,and analyze their advantages and disadvantages,and ultimately select the Behavioral Equilibrium Exchange Rate (BEER) model as thecalculation model.Second, using co-integration preliminary selected the seven impact of the RMBexchange rate economic variables were screened,finally found the RMB exchange rateco-integrated three indicators: labor productivity, openness and broad money supply.Then use1985to2011, a total of27years of annual data constructed RMB equilibrium exchange ratemodel, using the HP filter method, the long-run equilibrium value of the basic economicvariables the estimated RMB long-term equilibrium exchange rate, and then measure theequilibrium exchange rate and the real exchange rate compared and to determine the directionand extent of exchange rate misalignment.Found that from1985to the present, the exchangerate of the RMB against the U.S. dollar has experienced three stages of underestimation andoverestimation of the three stages. Next, a brief analysis of the RMB real exchange ratemisalignment conditions and causes, and introduces the impact of exchange ratemisalignment.Finally, gave policy recommendations to improve the RMB exchange ratemisalignment.