Research on factors influencing Renminbi real exchange rates

In this study,the empirical study on Chinese RMB real exchange rates is researched over the period from the first quarter in 1994 to the second quarter in 2005 by using the quarterly data.Firstly,we take US,Japan and Euro area as the base country respectively and test the productivity bias hypothesis.However,the result is not consistent with the theory.Secondly,we further study the relationship between Chinese RMB real exchange rate and various economic variables including the productivity bias factor by Johansen's cointegration analysis.The results show that there exists the cointegrating relationship between Chinese RMB real exchange rate and related economic variables including the factor of productivity bias.Subsequently,the impulse response analysis and variance decomposition are used to find out the main factors which affect the change in Chinese RMB real exchange rate.Finally,two important conclusions are obtained: First,various possible factors should be considered when we model Chinese RMB real exchange rate because only one factor is not enough.Second,the three main factors affecting the change in Chinese RMB real exchange rate are,productivity bias variable,open degree and the price of crude oil shock.