RMB Real Exchange Rate Pass-through Effect On Prices

The study about the exchange rate pass generally forms four theories:one is "complete exchange rate pass-through theory", a theory of the early assumption of elasticity of the price that the exchange rate fluctuations caused by the import and export price changes in the same proportion to the impact of exchange rate fluctuations on domestic prices, that is. the coefficient of exchange rate pass-through is 1; nominal price rigidity assumption that exchange rate fluctuations no impact on domestic prices at all, thereby the coefficient of exchange rate pass-through is is 0; Third, more research about sticky prices assume that an impact of exchange rate fluctuations on domestic prices, but because of the price stickiness, this effect due to the openness of the country or the company’s pricing strategies vary can not be completely impact on domestic prices, there is incomplete exchange rate pass-through, which made "n incomplete exchange rate pass-through theory ", that is, the exchange rate pass-through coefficient is between 0 and 1.; The presence of menu costs makes price adjustment by the manufacturers of the import and export trade exists a certain threshold, eventually leading to a non-linear relationship exists between exchange rate and price. This article uses threshold regression model, to test China’s exchange rate with the object is a linear completely passed completely non-pass, or invalid pass, or non-symmetric non-linear relationship. The empirical results show that China will be a non-complete exchange rate pass coefficients of the exchange rate pass model is more notable.