Research About Influence Of RMB Exchange Rate On The Price Of Imported Products

The change of exchange rate and international trade activities links closely. With a deeper level of opening, the role of international trade activities in economic development has become more and more important. In the context of global economic and financial integration, the level of opening is becoming deeper, while worldwide financial crisis occurs more frequently, the change of RMB exchange rate will have an important impact on our domestic economic development and economic activities with other countries. The change of exchange rate will have a direct influence on the price of goods and services, especially the commodity price relevant to international trade. Therefore, how the change of exchange rate will influence the commodity price has become an important part of research about exchange rate issue. In other words, it is very meaningful to find out how RMB exchange rate will influence the price of China’s imported products and how this effect influence our domestic economic development.With a deeper level of opening, the influence of price of imported commodities on domestic price index is increasing. The stable development of macro-economy depends on whether handling the relationship between price level and economic development well or not. The impact of RMB exchange rate on the price of imported products offers an effective perspective for regulating macroeconomic development stably. Thus, we focus on the influence of RMB exchange rate on consumer price index so that we can know more about how to regulate macroeconomic price level. In this way, the regulation on macro-economy can be regarded as effective and targeted.In conclusion, We establish model to analyse the impact factors of the price of imported products and make it clear that how RMB exchange rate influences the price of imported products in this paper, which is helpful to judge the future influence and to offer some advices to stimulate domestic economic development. Based on the monthly data from 2006 to 2013 in this paper, we take the price index of imported products as dependent variable and RMB real effective exchange rate, production cost, GDP and broad money supply as independent variables to make analysis about commodity structure, lag effect and asymmetric effect, using polynomial distribution lag model and vector error correction model.The paper is divided into the following four parts. The first part introduces the context and significance of this study and research status home and abroad. The second part is about theoretical explanation, including several theories of relationship between exchange rate and commodity price. Moreover, empirical model is deducted with qualitative analysis. The third part is empirical analysis. It will study the influence of RMB real effective exchange rate on the price of imported products from different aspects. The fourth part introduces the conclusions of the study and related revelation. Besides, the innovation points of this paper are also mentioned.This paper combines theoretical introduction,qualitative analysis and empirical research to study the lag effect and asymmetric influence of RMB exchange rate on the price of imported products. The price index is prepared with unit value method. The following conclusions are obtained. Firstly, RMB real effective exchange rate, production cost, GDP and broad money supply influence the price of imported products obviously. Secondly, The pass-through effect of RMB real effective exchange rate on the price of imported products is complete in the long run. Thirdly, the influence relation vary due to different commodity structure. To be specific, the price of imported primary products reacts more rapidly than that of imported manufactured goods for the change of RMB exchange rate, while the lag effect of RMB exchange rate on the price of imported manufactured goods lasts longer. Fourthly, the asymmetric effect of RMB real effective exchange rate on the price of imported primary products is obvious, while that on the price of imported manufactured goods is not obvious. To be specific, the pass-through effect is higher when RMB real effective exchange rate depreciates one unit than when it appreciates one unit. What is more, the pass-through effect of RMB real effective exchange rate on the price of imported primary products is obvious only when RMB real effective exchange rate changes more.