Abstracts: In this paper, we analyze the impact of RMB real exchange rate on China’s imports and exports by using the quarterly time series data from 1994 to 2008. We use the techniques of unit root test, co-integration test, and variance decomposition basing on the vector autoregressive model. The results suggest that RMB real exchange rate is the most important factor which affect the exports.  However, in the long term the foreign demand changes is the dominate factor affecting the exports fluctuations.

Key words: real exchange rate, export and import, Marshall-Lerner condition

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