Pass-Through Of RMB Exchange Rate Into Import And Export Prices

According to traditional theory, a change in the exchange rate can adjust the relative price of imports and exports, and then adjust the imbalance of international trade. That is why the RMB'exchange rate is appreciating under the pressure of the other countries, who is trade deficit against China. The research on the effect of exchange rate to price is called ERPT. For RMB, if the fluctuation of RMB has a little effect to the import and export price, then the result of adjustment may be finite. So it is important to learn the RMB'exchange rate pass-through to price. This paper do a research on the ERPT of RMB. Using the linear cointegration and threshold cointegration, we got the result of ERPT of RMB.First, we review lots of aboard and domestic research, from those study, we learn theoretical and empirical approach which can be used in the next part. Then according to the actual condition of China, we construct the theoretical model, through the model, we choose the variables that may be used in empirical research. Notably, in this part, we also built a nonlinear model to describe the nonlinear adjustment between price and exchange rate. we review the cointegration and threshold cointegtation. For the threshold method is a new way, we write a lot about it. The third part, we do the empirical research and get some results: In the long-run equilibrium, ERPT to import prices is -0.1173, to export price is -0.811. Moreover, according to the threshold model, there is a threshold effect in the ERPT to import price, but none in export price. In the last part, base on the result of empirical result, we make an analysis and give some advice which can be useful to operate the exchange rate policy.