| In recent years, with the process of economic globalization is accelerating, as a monetary value of the external manifestation the exchange rate has gradually become the core economic variable. And the way the relationship between exchange rate and price level, and the interaction between them has became the object of main study. Until July 21, 2005, China once again introduced the reform of exchange rate system and released a single exchange rate regime. At the same time, the Yuan against the dollar appreciated 2% directly, and the central bank announced that China’s exchange rate is no longer single pegged to the dollar, China has ushered in a more flexible RMB exchange rate adjustment mechanism.However, it is worth noting that since the exchange rate reform of China’s exchange rate began to accelerate, China’s total price lever, especially the food and consumer price, has been surging over the recent years. Now, the RMB has been facing tremendous pressure of appreciation. Thus, more and more experts and scholars have started to pay attention to the relation between the RMB exchange rate and the total price level, and the reason of the so-called "double up" situation in our country. According to the traditional economics theory, in the nominal effective exchange rate representation, a country’s exchange rate appreciation supposes to suppress the price level in a one way or another. However, China’s RMB appreciation of foreign and internal devaluation occurred at the same time. The social and economy phenomenon is contrary to the classic economic theory point of view. Therefore, how to explain the so-called chaos, and what is the corresponding contact of the RMB exchange rate and China’s price level remain to be discovered. In order to explore and explain this problem, this paper selected the data form 2001 January to 2014 December, combined with the related theories to study on the relation between China’s exchange rate and the price level. |
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