A Study On The Effect Of Price Transfer On The Change Of RMB Exchange Rate

In an open economic environment, as a country’s currency relative to the price level of another country’s currency, changes in a country’s exchange rate will cause a change in the domestic price level, further changes in the level of a country’s trade balance through expenditure switching effect and the domestic other macroeconomic variables have a significant impact. Since July 2005 China adopted the reform of RMB exchange rate regime, the RMB exchange rate basically stable trend in appreciation. In theory, the RMB appreciation can reduce exports by increasing imports and thus reduce a country’s trade surplus and help ease the pressure by expanding domestic phenomenon. However, this is not true. First, in the course of the appreciation of the RMB in China’s trade surplus has continued to increase, the current account surplus continued to increase, a phenomenon that lasted until 2009 have changed. However, taking into account since 2010, changes in exchange rates of RMB against U.S. dollar is not, apparently RMB exchange rate changes and changes in the trade surplus is not directly linked; Secondly, the RMB appreciation also did not change the level of domestic inflation in recent years, China’s currency inflation pressure has not decreased. Thus, theoretical and practical differences requires us to use a new perspective to examine this issue, this paper changes the perspective of the RMB exchange rate pass-through effect of the domestic price level on this issue based on a comprehensive, in-depth analysis.The first part of this paper defines the exchange rate pass connotation, and analyzed the exchange rate transmission mechanism. Starting from the purpose of this study, a clear research ideas, research framework, research methods and trying to solve the problem, to summarize the theoretical and empirical researches exchange rate pass, to clarify the current status of research on exchange rate pass, and researches on this issue to make a simple commentary. The second part of the article describes the system from a theoretical basis for the theory of exchange rate changes on the domestic price level to pass comprehensive analysis of exchange rate changes on the domestic price level of direct and indirect transmission pathways. The third part of the article is on the RMB exchange rate regime and the domestic price level review of recent years in an attempt to explore the relationship between the two. The fourth part of the article is empirical. In this paper, the structure of vector drawing McCarthy (2000) for specific empirical research autoregression model of exchange rate changes impact on the domestic price level of this problem. On the basis of the unit root test and Granger causality test on the use of the impulse response functions and variance decomposition of the RMB exchange rate on the price level analysis to estimate the extent of transfer. This paper also analyzes the context of financial crisis, the RMB exchange rate fluctuations on the domestic price level passes or without significant changes. The last part of the conclusions and recommendations of the article. On the basis of empirical research on the proposed change in the RMB exchange rate policy of some significance to the current macroeconomic issues.