Research On The Transfer Effect Of RMB Exchange Rate Changes On China's Grain Prices

Exchange rate is an important media for price pass-through and the process of government macro policy transmission.The exchange rate pass-through(ERPT),which means the degree of exchange rate movement affecting good prices,is related to a country's balance of payments adjustment speed and effect,the effect of monetary policy,trade competitiveness and economic impact of the international transfer,etc.Since July 21 in 2005,China has begun to implement a managed floating exchange rate system based on market supply and demand,with reference to a basket of currencies.After the exchange rate reform,the RMB exchange rate has been on the rise.However,with the rise of the RMB exchange rate,China's grain import prices did not appear sharp decline,but stabilized,and domestic food prices are rising.Rice and rice,wheat and corn is China's three major staple food.This paper takes three major staple food as an example,and researches how the RMB exchange rate pass-through affecting grain prices.In this paper,the process of the RMB exchange rate pass-through to grain prices is divided into two stages:to import prices and to domestic prices.According this pass-through process,this paper establishes the RMB exchange rate mechanism to reveal the grain prices transmission chain,measures and analyzes the effect of the RMB exchange rate movement on the grain import and domestic price of grain.This paper takes the three major staple grain as an example to study the change of RMB exchange rate pass-through to grain import prices and domestic prices.This paper chooses the relative data from July 2005 to December 2016 data to measure and analyze the degree of RMB exchange rate pass-through to the three major staple grain import prices and domestic prices.The empirical study finds that:first,long-term exchange rate pass-through coefficients to rice,wheat and corn import prices are-0.3533,-0.6484 and-0.6733,short-term coefficients are-0.7980,-0.3578 and-0.7683,the error correction coefficients are-0.2410,-0.3430 and-0.2261.Second,the long-term RMB exchange rate pass-through coefficient to rice,wheat,corn and domestic price are-0.0347,-0.0292 and-0.0493,the short-term coefficients are--0.0650,-0.0843 and-0.0231,the error correction coefficients are-0.5707,-0.7892 and-0.4516.According to the analysis of the empirical results,from the angle of the exchange rate pass-through,incomplete exchange rate pass-through is the reason that China's imports of staple prices slowly declining but domestic price rising.From the variables significance,the wheat import price short-term ERPT and rice,corn import price long-term ERPT can pass the test of significance in 5%level.However,no matter in long term and short term,rice,wheat and corn domestic price ERPT can not pass the test of significance in 5%level.This means that the ERPT effect to rice,wheat and corn domestic price is not obvious.From the angle of the ERPT coefficient,import prices of three staple grain are sensitive to exchange rate movement but domestic prices are not sensitive to that.The reason that the domestic prices are not sensitive to exchange rate may be that the import quantity are relatively small comparing to three staple grain consumption,so the movement of exchange rate pass-through can not be passed to domestic prices through import prices.Finally,this paper comes up with the policy suggestion that keeping the stability of the RMB exchange rate,controlling the inflation and improving the competitiveness of domestic staple grain.