| As the key variable in the dynamics of macro-economy, exchange rate plays a significant role. Its change not only impacts one economy’s domestic price level, but affects the relative price of import and export, and further disequilibrates the balance of trade.Since the market-oriented reform was carried out in July,2005, RMB has been appreciating a lot. During the period of July,2005to July,2013, the exchange rate between RMB and US dollar has increased by33.1%. Within the same period, the surplus of China’s current account rocketed from10.54billion US dollar to17.81dollar. The phenomenon of co-existence of appreciation and surplus contradicts withthe traditional theory. And this contradiction stimulates this paper explore other theories and perspectives to explain this new fact. This paper develops from the perspective of the exchange rate pass-through to export price.Specifically, it starts by defining the RMB exchange rate pass-through to China’s export price as "Incomplete Exchange Rate Pass-through". And then, it critically introduces and comments on related theories and literatures from views of the Pricing-to-Market theory, the Industrial Organization Theory and the New Open Macroeconomics. Further, based on the Pricing-to-Market theory and Krugman (1989), Marston (1990) and Yang (1997)’s basic structure, this paper creates a cost mark-up model of a representative firm exporting to multi outside markets. As for the empirical analysis, the paper hand-makes the export unit price index, the RMB effective exchange rate index and the consumer confidence index of13industries on the monthly base in accordance with the HS code. Along with Producer Price Index, these four indexes are taken as the replacements of export price, exchange rate, foreign demand and marginal cost variables. It adopts a fixed effects model to estimate the long-term exchange rate pass-through among China’s13export industries from July,2005to July,2013. Additionally, it considers the effect of volatility of nominal effective exchange rate on different industries’export prices and the degree of pricing-to-market. It then adopts a panel error correction model (ECM) to estimate the short-term dynamic exchange rate pass-through effect.Based on the empirical analysis, it finds the following results:as a whole, different exporting industries have different exchange pass-through rates. Among them, the textile industry, the garment, shoes and hat manufacturing industry, the toy and stationery manufacturing industry have the highest degree of pricing-to-market. Besides, the plastic product industry, the fur and feather related-product industry, the machine manufacturing industry and the electrical equipment industry have some degree of pricing-to market behavior. On the contrary, the pricing-to-market behavior does not exist in the chemical industry, the rubber product industry and the non-metal product industry. It further concludes that the intensity of productive factors can not be taken as the key determinants of pricing-to-market behavior. It should be explained from the aspects of market competition, product substitutability, mode of trade and tax refund. And the model with the volatility variable included shows the features as follows:firstly, the model with the volatility presents the higher degree of pricing-to-market and lower degree of exchange rate pass-through; secondly, the exchange rate volatility negatively impacts different industries’ export price. Moreover, the results estimated by the panel error correction model show that the exchange rate pass-through rate in the short-term is smaller than it in the long-term on average, and the short-term export price change will convergent to the long-term equilibrium. |
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