Research on the Persistence of the Real Effective Exchange Rate of RMB
The persistence of exchange rates stems from the phenomenon that the purchasing power parity theory does not hold in practice.This article innovatively studies the persistence of industry exchange rates,aiming to provide possible ex-planations for the mystery of purchasing power parity in China and provide reference for the government to formulate macroeco-nomic policies.This article examines China's monthly real effective exchange rate(REER)from August 2005 to December 2022,using grid bootstrap median unbiased estimation and factor modeling methods to examine exchange rate persistence at both national and industry levels.The empirical results show that,firstly,the persistence of China's REER,measured by half-life,is about 3.75 years.Sec-ondly,there are significant differences in the sustainability of REER across different industries,with the petroleum,chemical,and non-metallic industries having a half-life of less than one year.The half-life of four industries,including metals,paper-making,transportation equipment,and food,is 1～3 years.The half-life of six industries,including textiles,wood,rubber,gen-eral machinery,electrical machinery,and optical instruments,is approximately infinite.The sustainability of China's REER is mainly dominated by industries with abnormal half-lives such as textiles.Thirdly,factor analysis indicates that the exchange rate behavior of various industries is dominated by both common factors representing sustainability and specific factors reflect-ing their own characteristics.Industries such as textiles and electromechanical equipment,which lack product competitiveness and rely more on export trade,are prone to market based pricing behavior.The half-life of these industries is much longer than that of industries with certain market power such as chemicals and metals,which are less prone to market based pricing behav-ior.Based on the research findings,the following suggestions are proposed.Firstly,focus on the long-term effect,highlight the robustness of monetary and exchange rate policies,and reduce the need for arbitrary decision-making.Secondly,highlight policy structure and give additional attention or appropriate policy preferences to high sustainability industries.Thirdly,strengthen industrial innovation,promote industrial transformation and upgrading,enable export products to have both price and quality advantages,and create competitive barriers.
Real Effective Exchange RatePurchasing Power Parity DeviationPersistenceMedian Unbiased Estima-tion
万方数据
维普
