The Effect of RMB Exchange Rate Volatility on Import and Export Trade in China

The exchange rate volatility always plays a key role in import and export trade. This paper investigates the effect of nominal RMB exchange rate volatility on economic growth in China from 1981 to 2012. Through the ADF stationary test, the co-integration test, and the associated econometric model and the empirical analysis, the paper concludes that in the long run, exchange rate change has a positive impact on import and export trade. Therefore, it is necessary to take relevant policies and measures to adjust the RMB exchange rate at a reasonable level to avoid the RMB sharp appreciation in the short-term to promote a rational and efficient development for China's foreign trade.