Impact of RMB Exchange Rate Variability on Import and Export of China

Exchange rate is one of the elements affecting the import and export trade,and in the context of RMB appreciation,to study the effect of change of RMB exchange rate on Chinese import and export trade is very important.Based on Q4 1995 to Q4 2009 quarterly data,this paper uses Engle-Granger two-step analysis to study the impact of change of real effective exchange rate of RMB on Chinese import and export trade.Studies suggest that,during the long term,China's export trade not only have been influenced by foreign demand and real effective exchange rate fluctuations,but also insensitive to the change of exchange rate;China's import trade in the long term has been influenced by domestic income and the RMB real effective exchange rate.In the short term,negative correlation only exists between import trade and real effective exchange rate.