Statistical Analysis on RMB Equilibrium Exchange Rate

In this paper,5 factors,which affect the RMB exchange rate,are eventually chosen on the basis of the previous researches and the non-parameter test.Then the model of the RMB equilibrium exchange rate is constructed by means of Engle-Granger two-step method and improved by ridge estimation to solve the problem of Multi-Collinearity.The estimation of RMB equilibrium exchange rate gained from the model shows that RMB exchange rate has been under the appreciation pressure for a long time since real effect exchange rate had been underestimated during the period from 2002 to 2005.What's more, the situation becomes better after the system reform and exchange appreciation by 2% in July,2005.