Empirical study on the infl uence of RMB exchange rate misalignment on China's export —Based on the perspective of dualistic economic structure

Jian Lü ()
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Jian Lü: School of Economics, Nankai University, Tianjin 300071, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2007, vol. 2, issue 2, 224-236

Abstract: Using data from 1978 2005, this paper estimates RMB equilibrium exchange rate and misalignment respectively, and uses Engle-Granger (E-G) two-step method, error correction model to analyze the influence of RMB exchange rate misalignment on China's export. Because China is the economic transitional country with the character of dualistic economic structure, this paper introduces a control variant into the model which is the gap between agriculture and industry contribution to GDP. Conclusion shows that this model is more credible and stable. There is an obvious cointegration between China's export and RMB exchange rate misalignment, real effective exchange rate, domestic GDP and foreign weighted average GDP. RMB exchange rate misalignment has an obvious negative influence on China's export, but it has self-corrected dynamic mechanism. Then using binary Logit model, this paper concludes that the bigger RMB underestimated misalignment is, the bigger net export probability is, which is good for export. The bigger RMB overestimated misalignment is, the smaller net export probability is, which is bad for export.

Keywords: RMB exchange rate misalignment; equilibrium exchange rate; China's export; dualistic economic structure (search for similar items in EconPapers)
JEL-codes: E6 F31 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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