Empirical Study of RMB Equilibrium Exchange Rate and China's Exchange Rate Misalignment during 1997 ～ 2013

This paper employs the behavioral equilibrium exchange rate model to estimate the equilibrium real exchange rate of RMB and the exchange rate misalignment in China during 1997 to 2013. With Error- Correction Model,we analyze the short- term impacts of each variable on RMB real effective exchange rate. The result shows that RMB real exchange rate'fluctuation amplitude did not exceed ± 2% during the sample period. And the misalignment was less than 1% from 2010,this outcome indicates that RMB exchange rate almost reach the equilibrium level. Based on the research conclusions,four proposals were put forward: rational use the direction of government's consumption as a method to adjust exchange rate; further rationalizing and improve the capital market;gradually increase the self- correcting mechanisms of RMB exchange rate; proceed the economic transformation of China.