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Study on the RMB Exchange Rate Pass-through Effect to the Price

Author: ZhangShuai
Tutor: ZhaoZuo
School: Ocean University of China
Course: Finance
Keywords: pass-though effect RMB nominal effective exchange rate price index
CLC: F832.6
Type: Master's thesis
Year: 2009
Downloads: 404
Quote: 5
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Abstract

Since 2007,this round of inflation in our country has many different characteristics of the past,one of which is the clearly characteristics of external conduction,and whether the RMB exchange rate can be chosen as a strategy to deal with domestic inflation has a strong selection on the intellectual controversy.Many scholars believe that revaluation of the RMB not only reduce the domestic inflationary pressures,but also can adjust the international competitiveness of Chinese goods level,so it can play a win-win results;However,there are also some scholars of the RMB exchange rate pass-through effect doubt that the measures are to take the cart before the horse.To determine whether the appreciation can be a measure to the inflation,it requires us to research the RMB exchange rate pass-through effect to price, as well as the specific size of the pass-through effect coefficient.Regarding such question this article mainly divides two levels to conduct the research,and the first level is conducts the research about the RMB exchange rate to the import price index pass-through effect.The import price index has the closest relation to the exchange rate,and it directly reflected the influence of foreign exchange fluctuation to the imported product price.Research shows that short-term pass-through effect of RMB nominal effective exchange rate to import price index for -0.734,long-term pass-through effect for -2.346.The second level will study the consumer price index and the index of producer price which have a closer relation with the daily life.By the simplified solution to the structural vector autoregressive model for,the paper found that the nominal effective exchange rate of RMB appreciates one percentage point currently can bring the same period CPI0.2277 percent reduction after calculating,and taking into account the lagged effects of exchange-rate appreciation,a four-year cumulative is 0.23 percentage points;RMB nominal effective exchange rate appreciation of the current one percentage point can bring the same period PPI0.5046 percent reduction,and in four years it has a cumulative 0.562 percentage point reduction.Nominal effective exchange rate of RMB appreciation has a tightening effect to whether the consumer price index or producer price index,the exchange rate pass-through effect to prices does indeed exist,and the RMB nominal effective exchange rate pass-through effect appreciation for the consumer price index is less than the pass-through effect for the producer price index.For the exchange rate have different pass-through effects for different price indices,at the conclusion this paper raised the point that when the inflation comes from the external transmission of the international market,the RMB exchange rate relatively small appreciation can obtain good results;when the reason of the inflation is the cost-push type from the producer,the appreciation of the RMB exchange rate will also have good results;but when inflation is characterized by higher consumer price index,despite the appreciation of the RMB exchange rate has a tightening effect, it has to pay a greater cost,and it may will worsen foreign trade conditions and domestic economic situation,so be careful while.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Exchange rate,foreign financial relations
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