VEC virtual currency

1. Analysis of the causes and effects of RMB appreciation [Abstract] RMB exchange rate has become the focus of attention at home and abroad in recent years. On the basis of literature review and personal understanding, this paper first analyzes the reasons for RMB appreciation, then explores the impact of RMB exchange rate appreciation combined with China's actual situation, and finally puts forward countermeasures and policy suggestions based on personal understanding
[Key words] RMB appreciation purchasing power parity equilibrium exchange rate cost-benefit
I. The causes of RMB appreciation
in recent years, RMB exchange rate has become the focus of attention at home and abroad. After the exchange rate reform on July 21, 2005, China ended the "market-based, single and managed floating exchange rate system" since 1994, and turned to a more flexible "market-based, managed floating exchange rate system with reference to the exchange rate of a basket of currencies" instead of just pegging to the US dollar. Since then, RMB has rapidly appreciated by about 4.3% per year against the US dollar in a slight fluctuation, and it shows an accelerating trend. By February 21, 2008, RMB has appreciated by 11.8%
1. Long term exchange rate determination purchasing power parity theory
the starting point to understand the determination mechanism of exchange rate is a simple concept, namely the law of one price: if the goods proced by the two countries are homogeneous, and the transportation costs and transaction barriers are very low, then no matter which country the goods are proced by, their prices in the world should be the same. According to the theory of purchasing power parity, the change of exchange rate of any two currencies should reflect the change of the price level of the two countries
2. The equilibrium of medium and short-term exchange rate
for the medium and short-term exchange rate, this paper thinks that it is determined by the supply and demand of RMB in the market, and various factors in the market affect the supply and demand of RMB, and then affect the trend of RMB. This paper analyzes the situation of RMB exchange rate facing appreciation pressure through the supply and demand of foreign exchange market
(1) on the supply side
with the continuous and rapid development of China's economy, the export volume has increased significantly, and the amount of foreign investment has also remained at a high level. China is the country with the largest net capital inflow after the United States. Due to the double surpluses of current account and capital account, China's foreign exchange reserves show a momentum of rapid growth. In November 2006, foreign exchange reserves exceeded US $1 trillion, becoming the country with the largest foreign exchange reserves in the world. By December 2007, it reached a record US $1.5 trillion. The continuous increase of foreign exchange reserves, on the one hand, enhances China's ability to resist financial risks; on the other hand, excessive foreign exchange reserves also bring great pressure to China's macro-control, affecting the change of RMB exchange rate and increasing the pressure of RMB appreciation< (2) demand side
International comments on the appreciation of RMB were first put forward by Japan, the United States and other countries. In February 2003, Japanese finance minister Shoichiro Yanagawa declared at the meeting of finance ministers of the seven countries that "not only Japan's deflation is e to the import of too many cheap Chinese goods, but also the global economic downturn.". In June and July, U.S. Treasury Secretary snow and Federal Reserve Chairman Greenspan successively expressed their hope that RMB would be more flexible. Some American hospitals accused China of exporting a large number of cheap goods to the United States, resulting in a huge trade deficit in the United States, taking away employment opportunities in the United States, increasing the number of unemployed and depressing the economy. Later, the European Union also joined the ranks demanding RMB appreciation. After that, the international financial community is hot on the appreciation of RMB exchange rate, and e to the sharp increase of China's foreign exchange reserves, the expectation and pressure of RMB appreciation are increased. Although the Chinese government has indicated on various occasions that it is necessary to maintain the stability of the RMB and avoid a substantial appreciation, the fact is that since July 2006, when the central parity of the RMB exchange rate against the US dollar broke through the 8.0:1 mark, the RMB exchange rate has experienced a significant appreciation and accelerated trend, which not only increases the further expectation of the international hot money on the appreciation of the RMB, Moreover, it is bound to increase the appreciation expectations of domestic residents and enterprises, which will lead to the decline of foreign exchange demand< Secondly, the cost and benefit of RMB appreciation
1. The cost of RMB appreciation
RMB appreciation may face the following costs: first, it may rece exports and international income; Second, it may increase the domestic unemployment rate, especially the export enterprises closely linked with the RMB exchange rate; Third, it may increase the cost of foreign direct investment, which is not concive to attracting new foreign direct investment; Fourth, it may trigger the impact of speculative capital on the RMB exchange rate
from the perspective of general economic theory, these costs mentioned above often occur with the appreciation of the currency. Now, in combination with the actual situation in China, we will talk about whether all these costs will occur and how much impact they have
(1) RMB appreciation and export
as far as China's trade structure is concerned, the price elasticity of export demand is relatively small, and the adjustment of exchange rate will not bring much change to China's overall export volume. At present, the trade of processing and assembling with supplied materials and the trade of processing and assembling with imported materials account for about 55% of China's exports, while the trade of processing and assembling with supplied materials only earns a fixed public fee, which has nothing to do with the change of exchange rate. The import processing trade depends on the proportion of imported intermediate procts and raw materials. When the RMB appreciation, the export price rises, which is not good for some enterprises, but its purchasing power increases, and it can buy imports at a lower price. The net effect of exchange rate changes remains to be seen
(2) RMB appreciation and China's employment
according to the data of the National Bureau of statistics, in recent years, China's urban registered unemployment rate has been more than 4%. Because China's population is too large, the employment problem has always been the focus of social and government attention. The appreciation of RMB will lead to the price rise of export procts, which will exert great pressure on those enterprises that proce low value-added and low efficiency procts and mainly rely on foreign trade. At present, there are a large number of such small and medium-sized enterprises in China, and the number of employees is very large. If the appreciation of the RMB exchange rate increases the export cost of their procts, and then affects their exports, leading to a sharp rise in the unemployment rate of these enterprises, then it will bring great social problems to China, which already has employment problems< (3) RMB appreciation and foreign direct investment
at present, it is difficult to say how much FDI inflow will be reced by RMB appreciation. Since the mid-1990s, new changes have taken place in the motivation of FDI inflow. More FDI comes from multinational companies in developed countries in Europe and the United States. The purpose of investing in China is more inclined to aim at China's vast market than to take advantage of China's cheap labor cost. As long as China's overall macro-economy does not change much, the inflow of FDI will not decrease much, and it may even develop steadily and continuously with China's economy, The inflow of FDI will increase than before. Because in today's economic globalization, the channels of capital circulation are becoming more and more smooth. Because of the inherent profit seeking nature of capital, China, which has a broad market and good development prospects, will be the hunting ground for capital< (4) RMB appreciation and speculative capital may cause the impact of international hot money in the process of exchange rate adjustment, which is a serious test in China, which lacks a perfect financial mechanism. Under the strong expectation of RMB appreciation, international investment capital will try its best to flow into China through various channels, and then withdraw capital after RMB appreciation. Although there is no conclusive evidence that the rapid growth of China's real estate market and securities market in recent years is caused by international hot money, there are more and more signs that it is inseparable from them
2. Income from RMB appreciation
the most direct income from RMB appreciation is to enhance the purchasing power of RMB. At the same price level, Chinese residents can buy more foreign procts, which improves people's living and welfare level to a certain extent. For enterprises, they can import more raw materials, which is concive to recing proction costs. Secondly, the appreciation of RMB will rece the external liabilities of Chinese government and enterprises, and improve their solvency under other conditions; Moreover, the appropriate appreciation is concive to the adjustment and optimization of China's instrial structure, and promote the upgrading of commodity structure< Third, conclusions and policy recommendations
RMB exchange rate appreciation has advantages and disadvantages. After weighing the costs and benefits, this paper holds that RMB appreciation will make the nominal exchange rate graally move closer to the real equilibrium exchange rate, which is beneficial to China's long-term economic development, but at the same time, we should see that China's current financial system is not perfect, and the ability to defend financial risks is weak The huge employment population and the foreign trade oriented economy and instrial structure, which are greatly affected by the fluctuation of exchange rate, require that preventive measures should be taken to deal with the possible risks
1. Expand domestic demand and rece dependence on foreign trade
China's dependence on foreign trade is very high. According to the data of China Customs, the total import and export volume in 2007 was 2173.83 billion US dollars. According to the exchange rate of 1 US dollar to 7.5 RMB, China's dependence on foreign trade in 2007 was as high as 66%. However, statistics show that the proportion of China's consumption in the total GDP has graally declined in recent years. In 1992, the consumption rate was 62.4%. In 2007, the total retail sales of social consumer goods in China was 8921 billion yuan, and the consumption rate was only 36%. According to the empirical data since the reform and opening up, it is reasonable for China's consumption rate to be in the range of 61% - 65%. Investment, export and consumption are the troika of economic development. The current rapid economic development in China is mainly driven by investment, and it relies too much on export, resulting in a serious shortage of domestic demand. In view of the impact of RMB appreciation on China's foreign trade and the actual situation, China urgently needs to expand domestic demand and increase the consumption rate. In this regard, the government should take various measures to increase the income of residents, further improve the medical, housing, pension and other aspects of the social security system, to eliminate the worries of the people, so as to effectively release demand, expand consumption, not because of the fluctuation of the RMB exchange rate leading to a significant rection in exports, leading to substantial unemployment
2. Further improve the market mechanism of exchange rate formation and cultivate a relatively balanced exchange rate
the long-term nominal exchange rate deviates from the real exchange rate, resulting in exchange rate imbalance, which is not concive to the effective allocation of resources and the sound development of the economy. A perfect formation mechanism of equilibrium exchange rate is the fundamental measure to coordinate the balance of payments, and also the market solution to alleviate the "double surplus". For our country, it is unrealistic to float the exchange rate completely in the short term, but with the graal expansion of the floating range of the exchange rate, we can use the market mechanism to regulate the supply and demand of the foreign exchange market and implement a more flexible exchange rate system. At the same time, according to the multi polarization trend of the current international economic development, in the basket of currencies referenced by the RMB exchange rate, the US dollar component can be appropriately reced, and the proportion of euro, pound sterling, yen and other currencies can be increased, so as to avoid the risk that the fluctuation of US dollar will affect the substantial fluctuation of China's currency<
References:
[1] Lu Qianjin: currency and interest rate control under the condition of RMB appreciation. Shanghai finance, 2007, issue 5
[2] Wu Xinru: interaction between RMB and purchasing power parity: a VEC model analysis. Financial research, 2007, issue 8
[3] Wang Yuanlong: review and Prospect of RMB exchange rate trend. Contemporary finance, 2007, issue 3

2.

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> 09;boolm_bIsCoin; // Whether the currency
> 9th;intm_nValue;/ Monetary value
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/ / / People Monetary Type
classChineseM oney:publicMoney 
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> 09;ChineseMoney(): Money(){}
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private:
> 9; staticmap < string,vector < int >& gt; m_mapValidValues;// Legislative monetary units concentrate
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boolChineseMoney: :IsValid()const
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voidChineseMoney: :SetValildValues(conststring& strUnit,constvector < int >& amp; vecValidValues)
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6. Since 2002, the international community has been calling for the appreciation of RMB, especially in order to reverse its huge trade deficit with China, the United States has strongly demanded the appreciation of RMB against the US dollar. On July 21, 2005, the people's Bank of China announced that China will implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. At the same time, it announced that the trading price of the US dollar against RMB was adjusted to 8.11 yuan per US dollar, with an appreciation of about 2 percentage points. In this context, the relationship between the theoretical rate and China's trade balance begins to heat up. Many scholars worry that the appreciation of RMB exchange rate will bring serious impact on China's trade balance, and then affect the stability of China's national economy. Whether the above judgment is correct or not is based on our answers to the following questions: the mechanism of RMB real exchange rate changes on China's trade balance; Whether the mode, direction, degree and acceptance conditions of the effect of RMB real exchange rate on the income and expenditure of exchange are tenable in the long run; In the short term, whether to use the time lag of exertion; There is a "J" curve effect in Marshall le. The research on these issues is of great significance to the formulation of China's exchange rate policy. This paper uses the bilateral trade balance data of China and the United States from 1994 to 2005 to study the long-term and short-term effects of real exchange rate changes on trade balance. That is, we have a "J" curve effect in the pilot study; The impact of economic variables such as real exchange rate and real income on China's import and export and trade balance; In order to determine whether the Marshall Lerner condition is tenable in the long run; Whether the bilateral trade balance in the short term and the time lag of their respective roles. The methods used in this paper include co integration analysis, direction m, VEC response analysis and variance decomposition difference correction. We use cointegration analysis to study the long-term impact of real exchange rate on trade balance. In order to study the impact of real exchange rate and real income on trade balance, we use VECM short adjustment mechanism, and then do impulse response analysis and variance decomposition. Through empirical analysis, we come to the following conclusions: first, the impact of real exchange rate on import and export and trade balance is relatively small, and even some are not statistically significant, indicating that China can not effectively adjust trade balance through the change of real exchange rate. It reflects the current situation that the market-oriented trade balance equation of China's exchange rate formation is low degree of neutralization, importers and exporters are not sensitive to the change of exchange rate, and the substitutability of import and export commodities is weak. However, the positive parameters corresponding to the positive real exchange rate indicate that the Marshall Lerner condition holds in the long run. 2、 The "J" curve effect of impulse analysis shows that the lag period is about one year, which indicates that there is a very clear gap between the trade balance between China and the United States. 3、 Variance decomposition shows that the impact of real exchange rate shock on the change of trade balance is far less than that of real income shock on the change of trade balance; Through the impact on trade income with the United States, even considering the differences in economic growth rates between the two countries, the conclusion is still valid. Abstract Since 2002, the call for appreciation of RMB has surged upward unceasingly in the international society . Specially, US strongly requests China to increase the value of RMB to US dollar in order to reverse its large trade deficit to China. On July 21,2005, the People' s Bank of China announced that, the floating exchange rate system with the management will be implemented in China on the base of the market supply and demand. And a basket currency will act as a information referred when having an adjustment to RMB exchange rate. At the same time, exchange rate of RMB to US dollar is adjusted to 8.11 Yuan per US dollar, approximately 2 percentage points added in value. Under such background, the theorists put the more attention on the relationship between the real RMB exchange rate and Chinese trade balance. Many scholars worried that the appreciation of the RMB exchange rate will give Chinese trade balance a serious impact and will affect the stability of the national economy. If we want to know whether the above judgment is correct, we must answer the next questions: What is the mechanism that real RMB exchange rate affect Chinese trade balance by ? Does Marshall-Lerner condition hold from a long run ? Does the " J" curve effect exist in China from a short run ? How does real RMB exchange rate affect Chinese trade Balance ? On which direction and what degree do real RMB exchange rate affect Chinese trade Balance? How long will Chinese trade Balance be influenced after real RMB exchange rate begin to change ? It is very important for China to guide the current exchange rate policy through researching these questions. This paper is an empirical examination of long run relationship and short run relationship between real RMB exchange rate and Chinese bilateral trade Balance to the United States from 1994 to 2004.Namely, we try to judge whether Marshall-Lerner condition hold from a long run and whether the " J" curve effect exist in China from a short run . we try to judge the effect and time lag that the economical variables such as real RMB exchange rate and real income have an influence on Chinese import amounts ,export amounts and bilateral trade Balance . We research the long run effect that the real exchange rate to the import , export and trade balance through the Cointegration Analysis influence. In order to study the dynamic adjustment mechanism that the real exchange rate, the real income influence trade balance from a short run, we used the vector error correct model(VECM), the pulse response analysis and the variance decomposition.This paper uses the method including the Cointegration Analysis , the Vector Error Correct Model (VECM), the Pulse Response Analysis and the Variance Decomposition and so on. Through the empirical analysis, we obtain the next results : Firstly, The effect that the real exchange rate influences the import ,export and the trade balance is small, even is not remarkable in the statistics. It reflects there is a low degree of substitute between the imported goods and the exported goods as well. But, the positive parameter of the real RMB exchange rate in the standardized trade balance equation indicate Marshall-Lerner condition hold. It indicates we cannot effectively adjust the trade balance through the real exchange rate now. It reflects a low market degree in pricing foreign exchange, and the importer and exporter is insensitive to the change of the exchange rate. Secondly, the pulse analysis indicates that, the " J" curve effect displays extremely obviously, the period lagged is about a year. we discovered, regardless of in the short-term or in long-term, Chinese trade balance to the United States is mainly influenced by real American income, even if the difference in economic growth rate of both countries considered. Thirdly, the variance decomposition indicated that the real RMB exchange rate has much smaller influence on Chinese trade balance than the real income .

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