Font Size: a A A

Exchange Rate Fluctuations, Exchange Rate Pass-research, And Corporate Behavior

Posted on:2010-08-10Degree:DoctorType:Dissertation
Country:ChinaCandidate:S Q LinFull Text:PDF
GTID:1119360275991091Subject:Finance
Abstract/Summary:PDF Full Text Request
More than 3 years have passed since the RMB overnight appreciation in July 21,2005.The unexpected change in the RMB exchange level has forced theforeign-oriented enterprises in China to change their operation behavior,including theexport and investment behaviors so as to seek survival and development in thechanging economic environment.This paper intends to probe into the RMBappreciation's effects on the changes of the out-going enterprises' export andinvestment from the point of foreign exchange rate pass-through.The analysis integrates the theoretical and empirical methodologies throughout thewhole paper.The analysis is arranged as following:Firstly,the paper begins with the RMB appreciation's effects both on the economicenvironments of China's traditional export target markets and the newly-developedexport markets and the China's out-going enterprises' production costs and foreignexchange risks at home as well.Secondly,the paper discusses the export pricing behaviors of the enterprises underthe new macro-economic environment.The export models describe the enterprises'different behaviors with different target functions under non-complete competitiveeconomic environment.The differences arise from different control models of theenterprises.No matter what target function is,benefit is the only aim the enterprisesintend to achieve,so all the methods,procedures and timing employed arepurpose-oriented.In our analyzing different pricing behaviors,the paper discusses how the enterprisescompete from Cournot to Bertrand under changing target functions in different timingperiods,pointing out the transition's logical relationship and different competitivemodels the enterprises take.The market structure,being the key factor effecting thecompetition,is also discussed,the focus of the discussion is mainly on the negativecorrelation between the intensiveness of competition and price control.It is found thatunder the non-complete competition economic environment,the price control mechanism is most complicated under monopolistic competition and oligopolycompetition.Under oligopoly competition,the price control is more tensed than thatunder monopolistic competition,because price coalition is easier to be formed.Accordingly,the foreign exchange rate pass-through is highest under oligopolycompetition.The result of the market structure's theoretical analysis shows that themore integrated the market structure is,the stronger the pricing control is.The reasonis that the more integrated the market structure is,the more effective the resources canbe relocated,and the operation costs including the menu cost and sunk cost becomelower than ever or are so low as to be neglected.Export pricing behavior is the base of the foreign exchange rate pass-through,andthe level of the pass-through is the reflection of the pricing behavior.As a logic result,different models are formed to describe the different levels of the pass-through,including complete pass-through,non-complete pass-through,completely nopass-through,negative pass-through and super pass-through.The major creative theoretical point of the paper is the super pass-through.Based onTobin's theory of asset portfolio without risks and the author,the new theory isanalyzed beginning with the different enterprises' control models to find out the causesof the super pass-through,the preconditions for its realization and its effects as well.The paper also points out the symmetric features of the pass-through and theaftermaths of its impact on economy.Based on the findings of the theoretical analysis,empirical analysis is followed up toprove the soundness of the theory.By our using the first-hand data from the leadingout-going enterprises in Fujian Province,covering the export product structure,production cost and benefit's structure,a set of econometric models are used to test thetheory of the foreign exchange rate super pass-through in export.The result of theempirical study shows that the foreign owned enterprises (FOEs) with soleproprietorship or the Sino-foreign joint-ventures actually controlled by foreigninvestors are more likely to manipulate the export pricing to bring extra foreign capital,i.e.,hot money,into China to seek arbitrage in capital market and real estate market forhigher return.The behavior separates the export pricing from the effects of foreign exchange rate change to realize the super pass-through.The findings of the theory of the foreign exchange rate super pass-through show thatthe appreciation of RMB may be manipulated by ill-minded FOEs and some Chineseprivate enterprises to threaten the soundness of China's economy.The centralgovernment's aim to adjust China's economic structure from labor-driven to hi-techdriven may not be realized by using the monetary tools.Based on the above findings,the paper suggests that the policy makers of Chinese government should,first of all,consider how to effectively stop the arbitrage of the FOEs and keep the sustainabilityof the Chinese investment enterprises (CIEs) in mind when launching foreignexchange rate reform.Otherwise,the CIEs without being ready for the rigid changewill gradually lose their competitive advantages and the national economy will lose itsbackbone accordingly.There exist several shortcomings in the paper,for instances,several importantfactors like enterprise's psychological forecasts of RMB exchange rate's change andimport behaviors,which are decisive in the study of the foreign exchange ratepass-through,are not touched.All these are sure to be the fields for further study in thefuture.
Keywords/Search Tags:Renminbi, exchange rate pass-through, enterprise behaviors
PDF Full Text Request
Related items