An Empirical Study of the Impact of RMB Real Exchange Rate Misalignment on the Export

Based on the original literature and taking into account of the current economic transition of China, the paper focuses on the effects of RMB real exchange rate misalignment on China's exports by proposing a more reasonable model incorporating such variables as tax variable (export drawback), government consumption expenditure variable, terms of trade variable. Also an empirical test is conducted through Johansen co-integration test, error correction model, granger causality, impulse-response and variance decomposition method. It is found that RMB real exchange rate misalignment has negative impact on China's export from 1978-2005. Another finding is that through the analysis of logit model, RMB real exchange rate misalignment and net export are of negative correlation i.e., less misalignment, more export and as a result more trade surplus.