Empirical Analysis on the Relationship between Real Effective Exchange Rate of RMB and Processing Trade

After the reform of the establishment mechanism of the exchange rate of RMB,the appreciation trend of the exchange rate of RMB in the long run will produce a further effect on China's processing trade.Based on the time series data from 1981-2006,this paper uses econometric analysis methods such as Granger causality test,co-integration and regression model to analyze the relationship between the exchange rate of RMB and processing trade.And the conclusions are as follows:the exchange rate of RMB has increased the import,export of processing trade,which is opposed to the traditional exchange rate elasticity theory,thus the paper gives some explanations.