The Estimation of RMB's Equilibrium Exchange Rate Based on BEER Method

This paper firstly compares some theories and methods for assessing the equilibrium exchange rate, and then applies BEER method to estimate RMB’s real equilibrium exchange rate and its misalignment. The cointegration equation indicates that the increment of net foreign assets, the improvement of the terms of trade and the increment of the ratio between the price of non-traded goods and that of traded goods will drive RMB real exchange rate appreciation while the enhance of trade openness will drive RMB real exchange rate depreciation. And the misalignment result shows that misalignment of RMB’s real exchange rate exists in most periods of the observed periods. The current RMB real exchange rate is a little overvalued instead of undervalued. We should insist on the process of exchange rate reform and carry forward it gradually depending on our economic structure and situation.