The Study On Yuan-Dong Equilibrium Exchange Rate Based On Modified ERER Model

Since 1991,the relations between China and Vietnam gradually normalization,especially after established in 2010,China-asean free trade area established,trade ties between China and Vietnam trade is becoming more and more strengthened.In 2015,under the impetus of the people’s bank of China and state administration of foreign exchange,agricultural bank of China and bank of FUDIAN started the dong exchange business.On this basis,in order to promote the estuary port form a unified and standardized regional renminbi currency,the people’s bank of China branch to make the estuary yd index released convention,made clear the yuan against the vietnamese dong exchange rate pricing process and principles,exchange rates to perform supervision and emergency disposal,etc.As a result,The study on yuan-dong equilibrium exchange rate is urgent.Based on economic and trade conditions of China and Vietnam,through study the theoretical model of equilibrium exchange rate comparison,in this paper I draw a conclusion that the modified ERER model is the most appropriate model to applied to research of equilibrium exchange rate of the yuan against the vietnamese dong.Based on modified ERER model,in this paper I study the main factors which affecting the equilibrium exchange rate of the yuan against the vietnamese dong and calculate the deviation degree of real exchange rate of the yuan against the vietnamese dong and long-term equilibrium exchange rate,the conclusion is 2000-2007 yuan currency undervalued against the dong,2008-2014 RMB currency is overvalued against the dong,2015 RMB currency is undervalued against the dong,yuan relative to the dong has experienced the process from the undervalued to overvalued.Finally,based on an empirical analysis of the equilibrium exchange rate of the yuan against the vietnamese dong,I put forward the corresponding policy recommendations.China and Vietnam’s monetary and financial cooperation is a long-term,progressive and dynamic process.Looking from the actual situation,for the sake of the stability of the yuan against the dong’s exchange rate,we should actively carry out bilateral currency swap between China and Vietnam,to speed up the marketization of exchange rate reform,standardize the yuan against the vietnamese dong exchange rate pricing process,establish regional renminbi offshore market,and establishing the mechanismof RMB backflow.