Positive Analysis Of Export Price Pass-through Effect On Manufacturing Industry In China

According to the traditional international financial theory, the appreciation of RMB will undoubtedly enhance the export price of the commodity weakening the export competitiveness of our commodity. However, with the constantly appreciation of NEER (Nominal Effective Exchange Rate), the surplus of international trade has increased fast instead of declined. This dissertation will research and explain this myth from the aspect of ERPT (Exchange Rate Pass-Through).ERPT means the reflection of the fluctuation of exchange rate to the foreign currency price or domestic price of the tradable commodity. In the aspect of the industries and products, this indicator reflects the competitiveness of the nation in the international market and the power of price making. In the level of macro-economy, that could further indicate the independency of monetary policy and the rationality of the existing exchange rate institution. This dissertation has calculated the export exchange rate pass-through of manufacturing industry in our country by related empirical tests. By Co-integration Tests, Granger Causality Tests, and Impulse Response Function in VAR model, this dissertation has explained the international financial myth of significant increase of current account, balance of payments and foreign exchange reserve with the appreciation of RMB.From the view of co-integration tests, there is a long time stable relationship between the export price level of manufacturing industry and exchange rate, and the results indicate that the export price exchange rate pass-through has been keeping a relatively low level, and the price-exchange rate mechanism is blocked in the deep extent. For the appreciation of RMB, the general export price of manufacturing industry has kept decreasing instead of increasing, expanding the advantages of export of manufacturing industry. The results of Granger Causality Tests and Impulse Response Function in VAR model have proved that conclusion further.According to the aspect of adjustment of manufacturing industry, the enterprises with strong international competitiveness will mostly enhance or cut the export prices nominated in foreign currency with the reference to the fluctuation of exchange rate, whereas the enterprises with weak international competitiveness will only set the prices to the market, without any price making power. Low level of ERPT of export price will force the manufacturing industries in our country to adjust and upgrade, and will be helpful for the manufacturing industries to transform from exporting sale to domestic sale. For the appreciation of RMB and the existence of wage rigidity, the manufacturing enterprises will gradually move from the eastern coastal cities with high labor cost to the western area of low labor cost, and even to the much lower countries and regions.