The Change Of RMB Exchange Rate Affects The Threshold Effect Of Import Price

With the rapid development of China’s economy, China’s trade with the rest of the world become more and more frequent, the exchange rate has become a bridge between China and the world economy, its change also has an important influence on the domestic economy. Recently,RMB exchange rate face a huge appreciation pressure, RMB exchange rate system reform also increase the elasticity of the exchange rate, the fluctuations of RMB exchange rate are more frequent, more volatility. In this case, the study of RMB exchange rate transmission has important practical significance.Exchange rate transmission refers to the nominal effective exchange rate changes on a country’s trade, import and export price and the domestic price level generally. In an open economy, exchange rate as an important economic variables, it changes pass an important message to country’s trade balance, prices and other economic variables. So exchange rate transmission has always been an important part of the study of international economics. According to the early theory,the exchange rate to the price of transmission is complete, but this ideal state cannot be achieved in reality, therefore, the later scholars put forward the theory of incomplete exchange rate transmission. With the deepening of the research on exchange rate transmission, as a special form of incomplete transfer, exchange rate transmission of asymmetric research attracts the researcher’s attention. However, the asymmetry of the exchange rate is still a new field, the related research is scanty, it worth to do some further discussion.When discussing the impact of exchange rates on prices, some scholars treat exchange rates as a whole variable and there are some limitations. The impact on prices by exchange rates is closely related to the relative level position of exchange rates and the range of exchange rate changes. Based on a mark-up model, this paper firstly deduced a model about the pass-through effect of exchange rate changes on import prices. Then, we analyzed the threshold effect of the adjustment of RMB nominal effective exchange rate on import price at different levels and at different ranges with the method of threshold regression. It showed that small exchange rate volatility would make the adjustment mechanism of exchange rates on the price fail. When the volatility of RMB exchange rate is big enough(over2.1%), the reflecting sensitivity of exchange rate changes on import prices will enhance with the rising of exchange rates. The sensitivity in high exchange rate interval (over113.19) is significantly stronger than in the low exchange rate interval. Flexible adjustments of exchange rates should be based on the level of exchange rates and the actual volatility in exchange rates market.