Exchange Rate Low Pass-through And The Chinese Macroeconomic Fluctuations

With the continued integration of the world economy,the economic globalization has been forming. As a major economic power, China plays an important role in the world economy and occupies an important place in the forest of the world economy. Moreover,with the gradual integration in the global economy today, the importance of international trade has not be ignored, so it is imperative that we need to research the impact of exchange rate pass in an open economy on China’s macro economy.This paper mainly aimed to serve our country as a small open economy,to establish a New Keynesian dynamic stochastic general equilibrium models(DSGE),taking into account the exchange in a low pass-through environment,and adding some elements of New Keynesian to the model,such as nominal sticky wages,and some economic peculiar variables on a small open economy,terms of trade,real exchange rate,etc under the background of new open macroeconomics.At first,we build the DSGE model gradually,then apply general approach for DSGE model to calibrate the model parameters, to estimate, eventually to use parameters we reestimate into the model to simulate and we get some inclusions as follows:The improvement of technology and monetary policy can obtain output,but because of law of one price gap, inhancing the inflation rate while raising the output; when the economy is overheating, on the one hand,the law of one price gap would lead to imported inflation by the foreign domestic economy output and make the measures taken by the country not function properly;on the other hand, policy effect would obtain after introduction of nominal stickiness wages.Although the direction and cycle in macrceconomic about the introuduction of technology and the implementation of the role of monetary policy. The impact of technology’s impact on macroeconomic volatility is relatively moderate, while monetary policy in the country is more sensitive to the impact of macroeconomic fluctuations; in the long term,to realize the economic target,our country should introduce some advanced tecbnology,but because of law of one price gap due to a low pass-through of exchange rate and the time lag of monetary policy itself, so when the administration implement monetary policy to control the economy, it is appropriate to extend the implementation of the policy cycle and obtain the nominal stickness wages for making it really play a role and stabilizing the economy.