Measurement of EER of RMB and its Effect on International Trade and Forex
Ba Shusong Wu Bo Zhu Yuanqian
The paper measures the effective exchange rate based on the date of the reform of exchange rate regime, Abstract: This paper measures the effective exchange rate since the reform of exchange rate regime. And the result is compared with the data published by BIS. After Johansen cointegration and Granger causality testing to the data and variables, the research finds out that the EER of RMB is cointegrated with the international trade surplus in the long-term, and the depreciation of REER of RMB is one of the causes of the enlargement of China's trade surplus. But appreciation of RMB is not the effective way to change the"Double Favorable Balance"phenomenon. The change of trade structure can even lead the RMB exchange rate. And empirical analysis shows the increase of the elasticity of exchange rate can release the influence of the foreign exchange reserve on exchange rate.