The Effect Of Exchange Rate Pass-through On Domestic Price--Research Base On Chinese Quarterly Data After 1993

This paper assesses the extent to which the movements in exchange rate affect domestic production (PPI) and consumer (CPI) prices in China by analyzing data from 1st quarter 1993 to 4th quarter 1994. The empirical model is a recursive VAR, suggested by McCarthy (1997), The major findings of this paper are: the exchange rate pass-through has a moderate effect on domestic price, and its effect depends on the inflationary environment. This result should be useful in analyzing economic policies' effect and exchange-rate policies' making.