Real Effect of Exchange Rate in RMB and Trade Surplus in China

Zhe WANG

Abstract



The relationship between real effective exchange rate (REER) of RMB from 1997 to 2006 and trade surplus between China and other trade partners was discussed using cointegration vector autoregression in the paper. The study shows that there exists a long-standing and stable relationship between REER of RMB and trade balance; the fall of the real effective exchange rate of RMB is one of the reasons of the increasing trade surplus, however, the influences it brings are less than domestic GDP and trade partner’s GDP do. So, increasing the flexibility of the exchange rate of RMB, broadening the exchange rate’s float space between RMB and dollar are a necessary part of the package policies in solving the trade surplus.
Key words: RMB appreciation, real effective exchange rate, trade surplus, cointegration vector autoregression
Résumé: La relation entre le taux de change réel (TCR) de RMB de 1997 à 2006 et le surplus commercial de la Chine avec les autres partenaires commerciaux est discutée, en utilisant l’autoregression de vecteur de cointegration, dans l’article présent. L’étude montre qu’il existe un lien stable de longue date entre TCR de RMB et la balance commerciale, et que la baisse de TCR de RMB est une des raisons du surplus commercial croissant. Néanmoins, ses influences sont moins importantes que celles de PIB de notre pays et des partenaires. Ainsi, renforcer la flexibilité du taux de change de RMB, élargir l’espace de flottement du taux de change entre RMB et le dollar sont nécessaire pour résoudre le problème de surplus commercial.
Mots-Clés: appréciation de RMB, taux de change réel, surplus commercial, autoregression de vecteur de cointegration

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DOI: http://dx.doi.org/10.3968%2Fj.css.1923669720070305.016

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