The Analysis of RMB Real Exchange Rate Asymmetric Volatility Impact on Foreign-Invested Enterprises Export and Import in China

This paper estimates the impact of asymmetric RMB exchange rate volatility on the foreign-invested enterprises (FIEs) export and import. The volatility is measured by the conditional variance of RMB real effective exchange rate index from a threshold autoregressive conditional heteroskedasticity model. Using Engle-Granger co-integration method, this paper shows that the volatility of RMB exchange rate impacts FIEs export and import negatively in the long-run, which impacts FIEs export more severely. In short run, exchange rate volatility impacts FIEs export negatively, but impacts FIEs import positively. In conclusion, it is advisable to expand the RMB exchange rate floating range gradually by the Chinese government.