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The Empirical Research On Effects Of Pass-through From RMB Exchange Rate To Price Of Goods

Posted on:2011-02-03Degree:MasterType:Thesis
Country:ChinaCandidate:H HouFull Text:PDF
GTID:2189330332982671Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
July 21,2005, Central Bank of China announced the yuan by 2%. the RMB exchange rate system is no longer pegged to the dollar, but based on the market supply and demand with reference to a basket of currencies adjustment,and a managed floating exchange rate system. From that time on, the RMB exchange rate market-oriented was determined,and RMB exchange rate would leave fixed exchange rate system into a managed floating exchange rate system.This paper, using monthly data from 2001.01-2010.02, we studies the pass-through of RMB exchange rate changes to domestic prices. First, the paper explores the transfer effect of changes in RMB exchange rate on consumer prices of goods through the co-integration equation and error correction models. The result indicates that the transfer effect of changes in RMB exchange rates on domestic consumer prices of basic commodities is incomplete and time-lagged. Then, This paper investigates RMB nominal exchange rate pass-through by means of Vector Autoregressive Model. The result is that pass-through of RMB nominal exchange rate into China's consumer price has obvious statistical significant, but the influence degree is very low.Firstly, the paper reviewed on the exchange rate transmission mechanism of domestic and foreign research results. Secondly, this paper mainly studies that there are some factors,and these factors influenced the price level by empirical method. Based on Chinese reality, we improve a new VAR model including all above factors preceding research. We conducted co-integration test by Johansen-test. By the method of Impulse Response Function and Variance Decomposition, the article finds that supply shock and demand shock are major reasons; the influence of exchange rate and monetary policy is not obvious, this is different from the conclusions. This means that the high domestic prices can not be reduced only by monetary policy. Findings indicate that the transfer effect of changes in RMB exchange rates is incomplete and time-lagged. In the end, the paper shows empirical results, and proposed relevant policy suggestions.In this paper, the innovation points is that researching several specific commodity prices, and analyzing Effects of Pass-through from RMB Exchange Rate to Price of different goods.
Keywords/Search Tags:BIS effective exchange rate Real, domestic prices, Exchange rate pass-through, VAR Model
PDF Full Text Request
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