The Study Of Exchange Rate And Commodity Price Fluctuation On Domestic Inflation

With the development of economic globalization, the economic connections between conturies have become more and more closer.We pay more concern on how exchange rate and international commodity price influence the domestic price level.In19June2010, We promote the reform of Renminbi exchange rate formation mechanism,to enhance the stability of the Renminbi exchange rate flexibility.The exchange rate of Renminbi gradually appreciation, and the fluctuation range gradually enlarged,to accelerate the process of becoming closer to the world.At the same time international commodity price generally surge for some reasons,even violent fluctuations,and we rely on international commodities more and more.On the other hand, the domestic price level keep highly improve.The purpose of the paper is to anylsis the relationship among the exchange rate, the international commodity price and the domestic price level.In an open economy, it is good to konw the reason of domestic price fluctuate,to improve the capabilities of risk control, and take measures to deal with increasingly external shocks.In the paper,we first anaylsis the theories related to how the foreign exchange and international commodity price influence the domestic price.Summarizes the theories and models about the exchange rate and the international commodity price of external shocks.Describe the reform process of the exchange rate and fluctuations of the international commodity price.Then analysis of the pass-through of the exchange rate and the international commodity price to domestic price level.Then build up VEC model after examinations,use impluse response function and variance decomposition to anaylsis the pass-through of exchange rate and international commodity price.To distinguish the pass-through of the exchange rate and the international commodity price between different exchange rate system and economic openness,from the exchange rate reform in July2005,take the impulse response function to calculate the exchange rate and the international commodity price pass-through rate, in order to compare the pass-through rate before and after exchange rate reform.To konw the difference of pass-through rate between the exchange rate and the international commodity price.According to the result, pass-through of the exchange rate is greater after reform.The international commodity price has more and more strong influence on demostic price as the opening of economics,and the pass-through is greater than the exchange rate.