The Dynamic Effects Of RMB Exchange Rate Changes On China-Japan Agricultural Trade

With the development of China’s reform and the interaction between Chinese economy and world economy, the RMB exchange rate has become one of the most important Chinese financial prices. Especially since the great financial crisis broke out years agao, the exchange rate has become one of the factors can not be ignored in China’s foreign trade. Since the central bank PBC adjusted the exchange rate formation mechanism on July21,2005, the exchange rate changes have more and more important influence on China’s different industries. Import and export of agricultural products is an important part of China’s foreign trade and it has a special status. So exploring the dynamic effects of RMB exchange rate movements on the import and export of agricultural products has a major guiding significance in grasping the development direction and making the trade policy about China’s import and export of agricultural products.On the basis of the standard model, the author of this paper built unstructured vector autoregression model to study the effects of income, price, exchange rate regime reform on agricultural products trade. Considering the factors of technical barriers and Japan’s direct investment, this paper added two control variables. Making fully consideration of the changes in exchange rates reform and international economic reforms in recent years, the paper joined the Co-integration analysis, Granger causality test and Impulse response analysis, etc. By using the2005to2013’s monthly data for analysing and the author found that the depreciation of the RMB against the yen will promote China’s exports of agricultural products to Japan, inhibit China’s imports of agricultural products from Japan. In addition, the influence of a certain lag will delay in about2-3months. The growth of Japan’s GDP will promote the expansion of agricultural exports, GDP growth in China will promote the expansion of imports of agricultural products. This satisfies the income effect of international trade, namely, increasing a country’s income will cause the country’s corresponding increase in imports of agricultural products. Policy implications of the results are that people must pay more attention to exchange rate movements, and the government should provide more guidance and create more foreign exchange financial instruments for importers and exporters to hedge exchange rate risks as much as possible. All in all, the significance of this paper is to help people grasp the development trend of the international trade of agricultural products, and tries to provide clear guidance for importers and exporters about the direction of of China’s agriculture development.