| The central bank of China announced that it would give up a single dollar peg andtake the managed floating exchange rate regime, which is estimated by market as well aswith reference to a basket of currencies on July21,2005. After the reform of theexchange rate regime, RMB arises gradually and domestic academics call for the controlof RMB appreciation. What’s more, domestic prices soars rapidly, as a result it is urgentto study the affection of exchange rate regime reform on RMB exchange ratepass-through effects (ERPT).This thesis assumes that the exchange rate pass-through effect is based on the directtransfer mechanism and the expected mechanism, and builds a vector auto-regression(VAR) model to study the impact of exchange rate regime reform in July2005on RMBexchange rate pass-through effects, which contains four endogenous variables of thenominal effective exchange rate (NEER), import price index (MPI), the producer priceindex (PPI) and consumer price index (CPI), and three exogenous variables including thedemand shocks, supply shocks and monetary shocks. Moreover, this thesis uses impulseresponse function to analyze the difference of RMB exchange rate pass-through effects ofthese two periods.This thesis has four main conclusions. First, the RMB exchange rate pass-throughhas negative effect on three different prices (MPI, PPI, CPI) both before and after theexchange rate regime reform. Second, NEER has a small pass-through effect on the threeprices, and the pass-through effects decreased in order. Third, NEER pass-through effectson three prices changes are not during the same periods. The pass-through effect on MPIis mainly reflected in the early (1-3months), the PPI is mainly reflected in the early andmid-term (1-6months), and CPI pass-through effect is mainly reflected in the mid andlate (3-8months). Fourth, NEER pass-through effects on the three prices become muchlarger after the reform of the exchange rate regime in July2005. |
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