Study On RMB Exchange Rate Pass-through Effect

The RMB exchange rate issue has become the focus of international finance. In recent years, as the United States, the IMF, the European Union and other countries and organizations have put pressure on the currency issues, the RMB has also embarked on the road of a sustained appreciation. China’s import and export industry struggle to resist the financial crisis, while the RMB exchange rate issue has been overshadowed. What kind of impact does the RMB exchange rate result in the import and export trade, this problem can analyzed from the direct pass-through effect respective. In addition, as China’s economy is gradually recovering, the level of domestic inflation gradually rises. Whether the RMB exchange rate changes have impact on domestic price level, what implications of this paper has considering another problem, namely the indirect exchange rate pass-through effect.Study at home and abroad on the basis of empirical analysis is divided into two steps to investigate the impact of exchange rate on China’s price, the first step to study the direct exchange rate pass-through effect that the exchange rate on import prices used in this part of the new import the classification of goods and build on imported input price index and import price index of manufactured goods; the second step of the exchange rate indirect pass-through effect that the exchange rate of different price levels. The empirical results show that the nominal effective exchange rate of China’s direct pass effect and indirect pass-through effect is very small, and the transfer of the exchange rate on prices is incomplete. It’s also discovered that different price indices on the exchange rate have different transfer effects.