The impact of RMB appreciation on China's economy

Abstract

After China reformed the exchange rate policy in 2005, experts and scholars began to pay more attention to study the relationship between RMB exchange rate movements and China’s economy. Exchange rates are an important and comprehensive index of a country’s participation in international economic activities, and are also the link between domestic and international markets. The change of exchange rate will directly affect a country’s operation in an open economy. This paper uses an open macroeconomic model and adopts the ADF and cointergration test to investigate the impact of RMB appreciation on China’s economy.