Rmb Exchange Rate Pass-through To China’s Import Prices:an Empirical Analysis

The traditional economic theory shows that a country’s currency appreciation will result in reduced imports or exports increased, and will affect the country’s domestic price level. Since the exchange rate reform in China in2007, although China’s currency is facing appreciation pressure because of a steady rising, the trade surplus is still in the steady increase. Based on our current economic situation, effect size and trend of the RMB exchange rate is not completely passed as a theme for this study to try to explain this issue in the course of the study. Although there have been many studies on the issue of the RMB exchange rate pass-through, but the research of exchange rate pass multi-level point of view to study the effect size and trends of the RMB exchange rate pass-through are very little. In this paper, with the domestic and foreign exchange rate pass-through-related theories and with a variety of econometrics methods, we try to do more comprehensive analysis research of the pass-through of China’s currency effect size and trends.Firstly, we introduced the relevant research literature on exchange rate pass a more comprehensive review, and on this basis, through a combination of theoretical analysis and empirical analysis, we focus on the nominal effective exchange rate pass-through effect of import prices and changes trends. On the basis of the related literature, exchange rate pass-theoretical analysis framework and manufacturers export profits to maximize the economic principles, we try to build a theoretical model to further this theoretical model, and then a variety of empirical econometric model were derived.In the Part of empirical research, we estimated the RMB exchange rate pass-through coefficients and changes in trends by the econometric approach. Then a more detailed analysis of the RMB exchange rate pass-through effect is researched, such as the RMB exchange rate pass-through commodity structure effect, country effects, hysteresis, and nonlinear and threshold effects. The empirical results show that:exchange rate pass-through effect which is low as a whole is not fully passed in China, but still higher relative to developed countries; although China’s exchange rate pass-through effect to show a certain decline in the overall trend, but the pass-through effect big variations. From the country-specific factors, we can see that the transfer of China’s exchange rate on import prices more volatile compared with other countries; In addition, the RMB exchange rate pass showed the effect of a certain shorter lag, therefore this often bring rapid changes in the price level of the RMB exchange rate fluctuations; Finally, the RMB exchange rate pass-through exist asymmetric features, the exchange rate appreciation of passing on the import price is higher than the exchange rate depreciation on import prices pass; In addition, exchange rate pass-through effect of exchange rate fluctuations have greater exchange rate volatility is small, the exchange rate seems almost not passed.