RMB Exchange Rate Variation Of China World Trade

This study traces the impact between the variability of the RMB exchange rate and the global Chinese trade. The main objective of this research is to present the dominating links and interactions of the relationship and to examine-with advanced econometrics tools-the significance between the volatility of the exchange rate of RMB and Chinese imports and exports. It will be made a statement about the alternative exchange policy in China since 1994. After the founding of New China, several economic policies have been undertaken on behalf of the exchange rate of the Chinese currency. In this connection we will analyze China’s exchange rate:The changes since 1994 until 2005 (from a fixed exchange rate system of the RMB) and progressively, from the 21st July 2005, moved to a floating exchange rate system. Finally it will be evaluated, if the RMB fluctuations are more in line with the current economic policy under the premises of a floating exchange regime.There is a doctrinal controversy in the literature about the volatility of the exchange rate of RMB impact on international trade. Hence the literature does not allow us to conclude in mutual agreement. Therefore we will make clear definitions in this research and, based on empirical investigation, we will determine the impact of the rate of China’s currency. Eventually we aim to prove the existence of a significant effect of the RMB variability in the global Chinese trade.By using Augmented Dicker Fuller principles, this study examines the volatility of the exchange rate of RMB on Chinese international trade during the year 1996-2015. As verification and in order to figure out if our model have not a Unit Root, we use Johansen co-integration and Error Correction Model. Its serve us to validate our variables. In our model, the dependent variable is RMB exchange rate, while the independent variables are imports and exports (of different time periods).The results will allow us to make a conclusion about the correlation between the variability of the RMB exchange rate and the global Chinese trade. It will give us a hint, if in the long run a influence between the RMB exchange rate volatility on Chinese imports and exports exists.The results of this research could be served e.g. as a basic knowledge for Chinese authorities to forecast economic and social policies in order to maintain the stability of the RMB exchange rate, to better readjust the fluctuation in the RMB exchange rate or to manage a strong appreciation or depreciation of the currency in order to reduce the pressure exerted by the global economic powers and to boost accelerated and sustained growth of foreign trade.