Exchange Rate Volatility and Trade Flows: Date from China

This paper employs the conditional variance of the real effective exchange rate index from generalized autoregressive conditional heteroscedasticity(GARCH) models to proxy the exchange rate variability and represents attempt to use changes in real effective exchange rate index in studying the Impact of RMB exchange rate volatility on trade.It analyzes the stability of the export,import and exchange rate series by the means of unit root test.The empirical analysis on the impact of the RMB exchange rate volatility on China's export and import is conducted on the basis of the cointegration theory and vector error correction model.