Study Of Exchange Rate Changes,relative Change Of Prices And Import And Export Demand In China

The exchange rate is a hot topic in international economics in recent years.There are many factors that may affect the exchange rate.For large economies like China,external imbalances are caused by factors at home and abroad(Zhou Xiaochuan,2013).Internationally,the global recovery momentum continues to increase,and market confidence has also increased.However,the recovery is not complete,with potential growth in many countries remaining weak.In August 2017,the United States launched the 301 survey to China and announced in March this year that it will increase the tax of import goods from China.The large-scale increase of tariffs,combined with the sluggish global economic growth,and the rise of trade protectionism have made weak external demand a “cloudy” and a new normal covering China's export-oriented enterprises(Chen Xiaohua et al.,2017).On the domestic front,the Nineteenth Congress pointed out that China must further deepen the reform of the exchange rate marketization.It is under the joint action of various factors at home and abroad that scholars pay enough attention to the study of exchange rate and relative price level,and they also begin to rethink whether the original measurement and analysis tools are more in line with the actual economy.The parameters of the macroeconomic model may be time varying.As time goes by,if a constant parameter model is used,model setting errors may occur.If the model is too flexible when dealing with parameter changes,overfitting may occur.The empirical macroeconomic literature is increasingly turning to a time-varying parameter(TVP)model,which uses a specific class of a priori models to model the changes in the parameters,the use of layered a priori can greatly reduce the concerns of over-parameterization and,therefore,consider macroeconomics.The time-varying parameters model of the relationship between variables is more realistic.Exchange rate changes may affect price levels in three ways: direct(through affecting imports,raw materials affecting costs),indirect(through affecting net exports affecting demand),and monetary channels(Ji Min,2008),the first two of the three approaches all involve import/export trade.The third deals with the flow of international capital.Therefore,based on the theory of international economics,this article analyzes the equilibrium relationship between exchange rate changes and import/export trade(Marshall Lerner condition),changes in exchange rates and changes in relative price levels(relative purchasing power parity).The analysis establish a time-varying coefficient error correction model,which fully considers the relationship between variables.In the model,based on the theory of elasticity of international trade balance,an error correction model for the time-varying coefficient of imports and exports between China and the United States is established,and parameters are estimated,and the time-varying relationship between the exchange rate changes and import and export is analyzed,confirming the time-varying characteristics of Marshall Lerner condition.Then we further consider the time-varying characteristics of relative purchasing power parity,making the analysis of the relationship between macroeconomic variables more realistic and more conducive to making appropriate decisions.This article mainly contains four chapters.The first chapter elaborates the research background and contribution of the paper,and summarizes the research status and related literatures about the relative purchasing power parity and Marshall Lerner condition at home and abroad.The second chapter mainly describes the theoretical basis and measurement methods used in the modeling process of this dissertation,including the cointegration theory,the form of classic VECM and parameter estimation,etc.The construction of time-varying coefficient error correction model is also introduced.Chapters 3 and 4 are the core of the dissertation,which is to establish the time-varying error correction models for Marshall Lerner condition and relative purchasing power parity respectively,and estimate the model.The third chapter is the time-varying analysis of Marshall Lerner condition.The first section establishes an error correction model for import and export of China and the United States based on the theory of international trade balance elasticity and analysis of the error correction model of cointegration relationship,and further constructs an error correction model for time-varying coefficients;Section II describes the index variables Selection basis and data processing method;Section III establishes a time-varying coefficient error correction model for the import and export of China and the United States based on the established time-varying coefficient error correction model and selected indicator variables,and estimates parameters of the model and analyzes the time-varying of the cointegration relationship between exchange rate changes and import and export trade verified the time-varying conditions of Marshall Lerner condition.At the same time,it was found that exchange rate changes have a more stable impact on China's imports,but the impact on exports gradually weakened,so in the future we cannot Relying on currency depreciation to stimulate economic growth should focus on high-quality economic growth.It also means that the significance of analyzing the equilibrium relationship between exchange rate and inflation through import and export trade is limited.On the basis of Chapter 3,Chapter 4 uses short-term international capital inflows to explain the equilibrium relationship between exchange rate changes and relative price changes.In the first section,based on the theory of relative purchasing power parity analysis and analysis of the error correction model of the cointegration relationship,an error correction model of exchange rate fluctuations and relative price changes between China and the United States was established,and an error correction model for timevarying coefficients was further constructed;Section II describes index variables Based on the established time-varying coefficient error correction model and the selected indicator variables,an error correction model for the time-varying coefficient of Sino-US exchange rate fluctuations and relative price changes is established in Section 3.Analysis of the timevarying relationship between the co-integration relationship between exchange rate changes and relative price changes between China and the United States,verifying the time-varying relative purchasing power parity,and at the same time taking into account changes in short-term international capital flows,the equilibrium relationship between exchange rate changes of RMB and relative price changes.The change is reasonable,which coincides with the view of the economist Friedman that inflation is a monetary phenomenon at any time and under any circumstances.Therefore,we have reached a conclusion: In the future,China should focus on high-quality economic growth,but also pay attention to changes in the short-term international capital flows.