An Empirical Analysis of the Impact of RMB Exchange Rate Fluctuation on Textile and Clothing Export of Guangdong

Abstract

The main purpose of this paper is to analyze if RMB appreciation is the reason for the decline of Guangdong textile and garment exports and how to make textile and garment industry of Guangdong province break through the bottleneck of development, so as to achieve a qualitative leap in the context of the RMB exchange rate fluctuations and rising production costs. Five parts are included, the first part is introduction, which elaborates the research significance and literature review; the second part is about data and research methods; the third part is an empirical analysis of the impact of RMB exchange rate fluctuation on textile and clothing export of Guangdong; the fourth part is the conclusion analysis, while the last part are policy suggestion, which includes three aspects, government industry and enterprise themselves. In theory, the appreciation of the exchange rate will reduce the export price advantage to reduce exports. However, in this paper, the VAR and VEC models were constructed by using the monthly data of Guangdong textile and clothing export (LNEX), RMB real exchange rate (LNER) and purchasing price index (LNPPI) in 2007-2014, finding that Although LNEX has a co-integration relationship with LNER in the long run, LNER is not the Granger Cause of LNEX, while LNPPI passes the test of causality; Impulse response curves show that LNER has a negative impact on LNEX in the short term, while there is no shock effect for a long time; Variance decomposition analysis shows that contribution of LNER to LNEX was 0, both in the long term and short term, while the long-term contribution of LNPPI to LNEX is about 8%.