Research On KMB Appreciation Inhibit Inflation Based On Co Integration Of Structural Break

Recent years, the price fluctuation in China is subject to its own reasons, butalso largely affected by the external shocks. Rising energy prices, mineral contractran aground, the international speculative capital, as well as the impact of other majoreconomies to inflation may give our country exchange rate level and the domesticinterest rate effects, and further caused the domestic price level fluctuation. Alongwith the quantity and price monetary tools were used for many times, space and effecthave been weakened, inflation is still lingering shadow. Exchange rates to fightinflation is widely acknowledged, but there are also many scholars questioned. Basedon this, this paper chooses the change of RMB exchange rate pass-through effect asthe main research object, based on the RMB exchange rate pass-through effect theoryand empirical research, analysis of the RMB exchange rate transimission mechanismeffect size, to reveal the cause of incomplete exchange rate pass-through causes, andinvestigate the Incomplete Exchange Rate Pass-through Effect of our country underthe governance of inflation and exchange rate system of RMB reform and otherimportant issues.This paper firstly combs on the exchange rate pass-through and structuralmutation research results, based on the previous work, through the IS-LM-BP modelof exchange rate pass-through model. Then, based on the model, apply inside unripemultiple structural mutation of co-integration test, with structural break into differentsample intervals, stage research and exchange rate changes on CPI measured by thedomestic price level transfer effect, draw the following conclusions:(1) nominaleffective exchange rate of RMB and to CPI measured between the inflation long termequilibrium relationship does exist, and co-integration equation parameters during thesample period has significant structural mutation, mutation for the2002Decemberand2007April time;(2) the RMB exchange rate transmission mechanism in2007April mutation point after and before the onset of significant change, mutations in theformer RMB appreciation not only not on inflation to tightening, it will furtherexacerbate inflation; however after mutation of the appreciation of the RMB isconducive to curb inflation;(3) the appreciation of the RMB and the continuedappreciation of RMB interaction is the leading cause of CPI rising is the mostimportant factor, and the structure was more intense after mutation. The results show that the change of RMB exchange rate pass-through effect is obviously not complete,transfer effect is low, and agree to the open economy theory.