An Empirical Analysis on RMB Equilibrium Exchange Rate and Industrial Structure

In recent years, exchange rate which is as the main macroeconomic control measure and economic leverage tool plays an increasingly important role in the development of the domestic economy. The increase of exports, together with the reshuffling of export-oriented enterprises, makes RMB exchange rate the focus of attention in all academic and practical field. The paper made an empirical analysis on the RMB Equilibrium Exchange Rate and Industrial Structure by collecting data from 1981 to 2007, adjusting the model with specific condition, and choosing major fundamental indices that may be related to equilibrium exchange rate of RMB. The paper draws the conclusion that trade and government expenditure are the main factors of REER; the real effective exchange rate of RMB has always fluctuated around equilibrium exchange rate, experiencing overvaluation and undervaluation; the ability of RMB exchange rate revised itself is rather poor. The imperative adjustment of domestic industrial structure is necessary.