Effects of RMB Interest Rate and Exchange Rate Adjustment on Trade Balance

Author

He, Chengying ; Yu, Kaijiang ; Shao, Zuoyin

Author_Institution

Dept. of Strategic Res., Guosen Security, Shenzhen, China

fYear

2011

fDate

17-18 Oct. 2011

Firstpage

602

Lastpage

606

Abstract

This paper studies the impacts of RMB interest rate and exchange rate adjustment on China\´s trade balance using VEC model. Based on cost decomposition method, pricing-to-market and trade equilibrium equation, we observed that trade balance is negatively related to exchange rate, relative national income, relative interest rate, relative wage and relative price of inputs. RMB appreciates had "Inverse J-curve effect" on trade balance, and the rise of RMB\´s relative interest rate would reduce trade balance.

Keywords

economic indicators; exchange rates; pricing; China; RMB interest rate; VEC model; cost decomposition method; exchange rate; exchange rate adjustment; inverse J-curve effect; pricing-to-market; relative input price; relative interest rate; relative national income; relative wage; trade balance; trade equilibrium equation; Business; Economic indicators; Elasticity; Equations; Exchange rates; Mathematical model; Production; exchange rate; interest rate; pricing-to-market; trade balance;

fLanguage

English

Publisher

ieee

Conference_Titel

Business Intelligence and Financial Engineering (BIFE), 2011 Fourth International Conference on

Conference_Location

Wuhan

Print_ISBN

978-1-4577-1541-9

Type

conf

DOI

10.1109/BIFE.2011.53

Filename

6121213