| Over the past thirty years of reform and opening up,China's economy has made a rapid development,in which exports play a crucial role.From 2001-2008,China keep a high export growth rate at about 27.8%,but experience a negative growth in 2009 after the financial crisis.Although the situation has changed during the subsequent years,but in 2015,China's export growth rate in dollar is-2.8% year-on-year.In the course of economic downturn,some macro economists suggest that policymakers should promote the exports by devaluation,which can help perform the domestic structure reform.In order to alleviate the pressure of domestic economic growth,do we need to adjust the export trade through exchange rate policy instrument? How much can RMB exchange rate adjust the trade balance? This is a very important issue.In theory,if the exchange rate pass-through is high,then exchange rate change can adjust the trade;but if exchange rate pass-through is zero or small,exchange rate changes will not affect the trade obviously.On November 30,2015,RMB add to the SDR baskets,this means China's import and export trade status has been recognized by the world,which accelerate the process of RMB internationalization.On the other hand,it also indicates that the central bank's tolerance for the exchange rate fluctuations is increasing;the RMB exchange rate fluctuation range may be further expanded.Therefore,in the current economic situation,it is significant to do some research on the exchange rate pass-through.There's a lot of research on exchange rate pass-through at macro level,but this kind of analysis ignores the individual behavior of enterprises,which act as a key role in import and export trade;and exporters' pricing behavior is also affected by its heterogeneity.Although some literature discusses exchange rate pass-through from a micro perspective,they focus on how different micro factors affect exchange rate pass-through,and not from the perspective of heterogeneity firms.Therefore,this paper attempts to introduce the exchange rate pass-through into the model of heterogeneous firms,analyzing how firm's heterogeneity affects the RMB exchange rate pass-through,exploring the mechanism of RMB exchange rate fluctuation affects export price.In this paper,we mainly consider total factor productivity,firm's export product quality,credit constraints and imported intermediate inputs as firm's heterogeneity.There's little literature discussesexchange rate pass-through from a micro perspective in China,but we empirically analysis how different heterogeneity affect exchange rate pass-through using highly disaggregated Chinese micro data in this paper.Also,most of the exchange rate pass-throughstudies focus on how exchange rate affects import price or CPI,but we focus on how exchange rate affect export price.This paper first discusses the inherent mechanism how firm's productivity affect the exchange rate pass-through,and prove in the theory that higher productivity lead to lower exchange rate pass-through.Using matched data of Chinese industrial firms and customs import and export data from 2000-2006,we empirically analysis how firm's productivity affect RMB exchange rate pass-through and what the magnitude is.Then we analyze how product quality affects RMB exchange rate pass-through theoretically,and prove in the theory that product quality and the RMB exchange rate pass-through is positively related.Then we use a highly disaggregated Chinese customs import and export data from 2000-2013,to calculate the quality of China's export products according to the latest estimate method used in Khandelwal et al.(2013).Finally,we empirically analyze how product quality affects RMB exchange rate pass-through.Furthermore,we analyze the relationship between credit constraints and RMB exchange rate pass-through theoretically,and prove in the theorythat constrained firms are associated withhigher exchange rate pass-through.Using matched data of Chinese industrial firms and customs import and export data from 2000 to 2009,we construct the indicator of credit constrains.Then we empirically analysis how credit constraints affect RMB exchange rate pass-through.Finally,we analysis the inherent mechanism how imported intermediate inputs affect the exchange rate pass-through,and prove in the theory that higher imported intermediate inputslead to lower exchange rate pass-through.Using matched data of Chinese industrial firms and customs import and export data from 2000-2006,we empirically analysis how firm'simported intermediate inputs affect RMB exchange rate pass-through and what the magnitude is.The main conclusions include:First,from the point of firm's productivity,it affects the firm's ability to adjusting price markup through channel of price markup,then affect exchange rate pass-throughof firm's export price.The exchange rate pass-through will decrease by 0.43% if firm's productivity increases by 10%.Firm's productivity affects exchange rate pass-throughobviously,if the firm's productivityin log value is 1.66(the 5th percentile of productivity distribution),the exchange rate pass-through is 89.3%(1-0.036-0.043*1.66),if the share of imported intermediate input is 2.21(the 95 th percentile of productivity distribution),the exchange rate pass-through is 86.9%(1-0.036-0.043*2.21).When we divide the sample into five groups by productivity,then investigate the exchange rate pass-through in different groups,we find the results are robust.Second,from the perspective of export product quality,product quality affects the pricing ability of enterprise through consumers' price elasticity of demand,the higher product quality,the less elasticity of demand,thus the stronger firm's pricing ability.Due to the quality of export products is various to different firms,in the face of exchange rate fluctuations,different enterprises should respond differently.Our empirical results show that if the quality of products raises by a standard deviation from the average value,the exchange rate elasticity of export prices rises from 22.5% to 29.8%(growth rate is 32.4%).This means,the exchange rate pass rate is 77.5% when the quality of the products is at average level and the exchange rate pass-through decreases to 70.2% when the quality of the products increases a standard deviation.Third,from the point of credit constraint,it affects exchange rate pass-through through firm's pricing power.The mechanism is that credit constraint affects price markup through changing firm production efficiency,so financially constrained firms pass through exchange rate change more than unconstrained firms.The exchange rate pass-through is 77.4% when liquidity ratio is at the average level,while the exchange rate pass-through decreases to 76.7% when liquidity ratio increases one standard deviation.The exchange rate pass-through is 78.1% when the leverage ratio at the average level,and the exchange rate pass-through increases to 79.7% when leverage ratio increases one standard deviation.Finally,from the point of imported intermediate input,it affects the firm's ability to hedge exchange rate risk through marginal cost channel,and then affect exchange rate pass-through.The exchange rate pass-through will decrease by 0.84% if the share of imported intermediate inputs increases by 10%.Firm's imported intermediate input affect exchange rate pass-throughobviously,if the firm's share of imported intermediate input is 0(the 5th percentile of imported intermediate input share),the exchange rate pass-through is 88.1%(1-0.119),if the share of imported intermediate input is 0.492(the 95 th percentile of imported intermediate input share),the exchange rate pass-through is 84%(1-0.119-0.084*0.492).When we divide the sample into five groups by the share of import inputs,then investigate the exchange rate pass-through in different groups,we find the results are also robust. |
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