Lu Commissar: How Much Should The Exchange Rate Be Achieved By Achieving The Export Target?

< p > in the first quarter of this year, China's foreign trade has seen a negative export growth in the past 20 years.

In May, the Ministry of Commerce issued a statement on the situation of China's foreign trade: the current foreign trade faces many difficulties and challenges, and the annual target of 7.5% is very difficult.

In May 15th, the general office of the State Council promulgated the "opinions on supporting the steady growth of foreign trade". The first thing mentioned in the "strengthening policy guarantee" is to "enhance the two-way floating elasticity of RMB exchange rate".

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< p > data show that the growth rate of China's foreign trade has been slowing sharply since 2010.

In the data analysis of many previous articles, the author said that the effective exchange rate of RMB has a greater impact on import and export compared with the exchange rate of RMB against the US dollar. Under the background of the current global economic recovery, it is the overvaluation of the effective exchange rate that restricts the development of China's foreign trade.

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< p > > therefore, this article attempts to estimate: for a given annual export growth rate of 7.5%, how much adjustment should be made to the effective exchange rate of RMB? From a more intuitive and clearer policy recommendation, I will further deduce the magnitude of the adjustment needed for the bilateral exchange rate of RMB against the US dollar from the adjustment range of effective exchange rate.

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< p > this article will take two steps to deduce the adjustment range of RMB to us dollar bilateral exchange rate: first, calculate the level of nominal effective exchange rate of RMB under the given export growth target, what level should be at the same time? Second step, according to the nominal effective exchange rate which is consistent with the export goal, deduce the adjustment range of RMB relative to the US dollar bilateral exchange rate.

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< p > the monthly frequency data from January 1994 to April 2014 are used in this paper.

In the second part, when the bilateral exchange rate is derived from the effective exchange rate, we need to use the geometric growth rate. Therefore, in order to ensure the consistency of the calculation before and after the model, the year-on-year growth rate used in this paper is the geometric growth rate, that is, the difference between the absolute logarithmic and the logarithmic level.

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< p > strong > RMB nominal "a href=" http://www.91se91.com/news/index_c.asp > effective exchange rate < /a > how much should be adjusted < /strong > /p >

(P) exports are affected by price and external demand. The price is the strength of effective exchange rate, reflecting the relative competitiveness of products in the global market. The effective exchange rate is weak, and export prices are highly competitive. The external demand is determined by the economic situation of China's major trading partners, that is, the better the overseas economic situation, the more import demand from the world.

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According to the above logical relationship, I set up the OECD leading index (including the OECD member countries and the six main non member countries) as the leading indicator of the growth rate of the export effective rate and the trading partner's economic status, including the OECD Member States and the main non member countries. The year-on-year change rate is set as an independent variable.

By comparison, we can find out the relationship between them and the year-on-year growth rate of exports: the two independent variables are most obvious in the lag of 3 months and the export year-on-year relationship, and the export year-on-year relationship has a reverse relationship with the nominal effective exchange rate, and has a positive relationship with the OECD leading index, which is in line with expectations.

At the same time, we also found that, from the beginning of 2013, exports had a certain departure from the OECD leading index's year-on-year trend, that is, China's exports did not become stronger with the recovery of the global economy, which reflected that the effective exchange rate of RMB could be overvalued.

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On the basis of visual analysis, we model the above causality based on < p >.

According to statistics, the RMB nominal effective exchange rate and the OECD lead index had a long-term cointegration relationship with the export year-on-year, and they all contributed to the Grainger growth rate of the year-on-year growth rate of exports (F value was about 10 and 9 respectively).

In this regard, we carried out a linear regression of two yuan and got the result: < /p >

< p > a href= "http://www.91se91.com/news/index_c.asp" > export < /a > =20.65-1.38 * nominal effective exchange rate (Lag 3 months) +4.11 * OECD leading index (Lag 3 months) equation 1 < /p >

< p > regression coefficient is significant, but the fitting coefficient R is about 0.59, and the fitting degree is not good.

At the same time, the model also shows a noteworthy problem: the estimated value of the model constant is too large.

According to the data characteristics, I think the export situation of China in the past is generally good, and the average annual growth rate of exports is up to 15% from 1993 to 2009, and the average rate is 8% in 2009. The average decline in 2013 has dropped to only 5%.

As the current foreign trade situation is still grim, it is possible to predict the future export trend with this constant.

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< p > to solve this problem, I introduce the adjustment variable to reflect the decrement of the constant term.

The adjusted variable is the annual average annual growth rate of exports in the year of the sample in that month.

The revised model is: < /p >

< p > export, =7.73-0.53 * nominal effective exchange rate (Lag 3 months) +2.48 * OECD leading index (Lag 3 months) +0.71 x export average annual value equation 2 < /p >

< p > regression coefficients are significant, and the fitting coefficient R is about 0.71, which is better than the unadjusted model.

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< p > according to the above regression equation, we can calculate: assuming that the world economy can basically maintain the recovery rate of 0.6% in 2013 this year, considering that the average growth rate of China's exports up to 2014 is -4%.

Then, if we want to achieve 7.5% year-on-year growth in exports, the nominal effective exchange rate of RMB will grow by -2.12% compared to the same period last year, that is, we should depreciate 2.12%.

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< p > however, the above model is also faced with a problem, that is, the credibility of China's export data, especially since the second half of 2012, China's export data has become a fact of recognition.

To solve this problem, I will replace the growth rate of China's customs export volume with the growth rate of imports from China's main trading partners, and re substituting the model to get the result: < /p >

< p > export, =5.96-0.42 * nominal effective exchange rate (Lag 3 months) +2.05 * OECD leading index (Lag 3 months) +0.59 x export average annual value equation 3 < /p >

< p > regression coefficients are significant, and the fitting coefficient R is about 0.83, which is superior to the fitting degree of the two models mentioned above.

For the adjusted model, assuming a 7.5% year-on-year growth in exports, the nominal effective exchange rate of the RMB should depreciate by 6.36%.

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< p > < strong > > a > href= > http://www.91se91.com/news/index_c.asp > RMB > /a > how to adjust the bilateral exchange rate relative to the US dollar < /strong > /p >

< p > first, the BIS nominal effective exchange rate index I used is derived from the geometric weighting of the exchange rate of 61 economies relative to the RMB, of which the US dollar accounts for 19%, the euro accounts for 19.5%, the Japanese yen accounts for 15.9%, and the other emerging economies account for 45.7%.

To simplify the model and prevent the multicollinearity problem, we only introduce 4 independent variables: the US dollar, euro and yen represent the currencies of the developed economies, accounting for 54.3%, while we treat emerging economies as a whole.

Since there is no suitable index to measure the change of the overall level of exchange rate in emerging economies, we calculate the exchange rate weights of various economies based on the BIS calculation of the RMB effective exchange rate, and select the emerging economies which occupy the top 15, accounting for about 32%, and the arithmetic weighted average year-on-year changes relative to the US dollar bilateral exchange rate. We have constructed an index that depicts the change of the overall currency of the emerging economies relative to the US dollar, which is used as the fourth independent variable to introduce the model.

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In the formula for calculating the nominal effective exchange rate of RMB, the cross exchange rate of other economies relative to the RMB can be obtained according to the bilateral exchange rate of RMB against the US dollar and the bilateral exchange rate of the currency relative to the US dollar in the formula P.

Therefore, I use NEER to represent the nominal effective exchange rate year-on-year change rate of RMB, USD represents the year-on-year rate of change of the bilateral exchange rate of RMB against the US dollar, the rate of change of the bilateral exchange rate on behalf of the euro relative to the US dollar, JPY represents the exchange rate of the US dollar relative to the Japanese yen exchange rate, and EM represents the weighted average of the change rate of the exchange rate against the US dollar direct quotation method in the emerging economies. The rise of NEER represents the appreciation of the RMB, and the rise of JPY and the rise of EM respectively represent the depreciation of the yen and the emerging economies relative to the US dollar. The rise of the NEER represents the euro's rise relative to the US dollar.

According to the framework of BIS nominal effective exchange rate, we can approximately establish a linear regression model of four yuan once the logarithmic difference operation is done on both sides of the equation: < /p >

< p > NEER=-1.14USD+0.22*JPY-0.31*EUR+0.33*EM equation 4 < /p >

< p > regression coefficients are significant, and the fitting coefficient R is about 0.79.

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< p > according to the mainstream judgement of the market trend of exchange rate this year, the US Federal Reserve QE will continue to withdraw from the future. The euro area may launch the European version of QE in the future. The Bank of Japan will continue to maintain a relatively loose monetary stance. And the emerging economies will be faced with the pressure of international capital returning to the developed economies caused by the withdrawal of QE from the US Federal Reserve. I expect that the euro, yen and emerging economies will weaken relative to the US dollar this year.

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< p > assuming that the total currency of the euro, yen and emerging economies is 2% lower than that of the US dollar (because the euro and yen share a total weight of 71% in the US dollar index, so the approximate US dollar index can be appreciated by 2% to 81.6). After substitution for the above equation, we can get USD= (0.48%-NEER) /1.14.

Considering that the target of NEER calculated by equation 3 is to depreciate 6.36%, then the RMB should depreciate to 6% relative to the US dollar. Correspondingly, the market price of the RMB dollar exchange rate should be adjusted from 6.07 to 6.43 at the beginning of the year.

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After P, the RMB began to depreciate.

According to the latest data, the market price (bid) has exceeded 6.15% of the integer threshold, reaching 6.17, and the intermediate price has reached 6.25 of the important psychological barrier for the first time, reaching 6.26.

The middle price and market price have depreciated by 1.25% and 3.55% respectively, compared with the highest level reached 6.09 and 6.04 at the end of the year.

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