Test for exogeneity of the exchange rate of RMB: HER-Johansen approach

Based on conditional and marginal error correction model, this paper testifies the exogeneity of RMB exchange rate in China. Our study shows that the growth of GDP may benefit from the depreciation of real exchange rate of RMB. However, exchange rate regime of China is lack of elasticity due to weak, strong exogeneity of the real effective exchange rate of RMB, which makes it hard to facilitate economic growth. But real effective exchange rate of RMB is not super exogenous, which means the gradual reform of exchange rate regime of RMB has achieved some degree of success. Therefore, the market-oriented and internationalization reform will be favorable for the development of China's economy.