Research Of The Pass-through Effect Of RMB Exchange Rate On Import Prices

With the further development of China's exchange regime reform and the reduction of foreign exchange control.Renminbi has been in the appreciation and it's fluctuations increase gradually.The fluctuations of exchange rate is not only related to a country's trade balance,but also affects the domestic price through import price.We research the influence of RMB exchange rate fluctuations on import price,investigate the effect of exchange rate on the import price when it changes in different direction and magnitude.It is important to understand the trade imbalances and control the domestic price.This paper reviews the domestic and overseas empirical research results about the incompleteness and asymmetry of exchange rate pass-through.Then introduces the mainstream theories about the incompleteness and asymmetry of exchange rate pass-through.Then establish the empirical model based on Campa and Goldberg's theory.This paper do the research from two points.One is adopted the JJ co integration test and established error correction model.This paper explores the exchange rate pass-through in the short term and long term.Then research the dynamic trend of RMB exchange rate pass-through by applying rolling regression.One is using quantitative methods including dummy variable to researched the RMB exchange rate pass-through from the direction of the exchange rate movement and the size of the exchange rate movement.The conclusions show that the RMB exchange rate pass-through is incomplete in short term and long term.The RMB exchange rate pass-through to import prices is on declining trend.This paper explains the phenomenon through macro economy situation and structure of the import products.The RMB exchange rate pass-through is bigger when it is in depreciation than in appreciation.The result is consistent with "market structure theory" and "Quantity restriction theory".The RMB exchange rate pass-through has greater effect on import prices when it changes in larger size.