The Real Bilateral Exchange Rate of RMB and Sino-Korean Trade Balance——An Empirical Research Based on Time Series

Applying a co-integration and error correction model and employing bilateral data from 1991 Q1 to 2005 Q4,this paper attempts to explore the relationship between bilateral real exchange rate of RMB and Sino-Korea trade balance.The result indicates that there is a steady long-term relationship between bilateral real exchange rate of RMB and Sino-Korea trade balance.However,since the elasticity of exchange rate is too small,the change of exchange rate has a limited influence on Sino-Korea trade balance.In a short-run there is no lag on Sino-Korea trade balance processed by the real exchange rate.The slow appreciation of RMB will not bring great fluctuation to Sino-Korea trade balance.