INTERNATIONALIZATION OF RENMINBI AND THE REAL EFFECTIVE EXCHANGE RATE

The idea of examining the effects of chosen variables versus the real effective exchange rate (REER) arose after observing the current tendencies in global trade processes and the position of China on global markets. Also the eruption of the world financial and economic crisis led to devaluation processes of world currencies and introduction of massive quantitative easing programs which distorted competitiveness of countries. China is not an exception. The key objective of the article is to find out how the foreign direct investment (FDI), openness of Chinese economy, GDP growth and total unemployment affects the REER of China during the periods between 1991 and 2014. In addition, terms of trade and net foreign trade will be tested additionally as explanatory factors. The OLS method was used to establish the relationship as well as the direction of causation between variables.