An Analysis Of The Effect Of RMB Exchange Rate On Domestic Price Transmission

As an important external factor affecting the national economy,the exchange rate has always been the focus of the scholars’ research.On the basis of previous studies,this paper further examines the asymmetric nature of the different direction of exchange rate(appreciation and devaluation)of the exchange rate of RMB exchange rate.In the last more than 10 years,the gradual appreciation of the RMB exchange rate has been accompanied by a continuous rise in the domestic price level.In such a realistic context,the appreciation of the exchange rate can inhibit the inflation of the purchasing power parity theory.This article will explain this phenomenon from the angle of asymmetric exchange effect of RMB exchange rate and reveal the relationship between RMB exchange rate and price index in China.On this basis,it is suggested that the regulation policy of the central bank should be different.The development of exchange rate transfer theory has experienced from the beginning that the exchange rate transfer effect is complete and incomplete,and then to the process of asymmetry.First of all,this paper analyzes the exchange rate transfer theory from these three theories,and expounds the process of the continuous deepening and development of exchange rate transfer theory.Second,choose the vector autoregressive model(VAR)model as econometric model of this article,in the third quarter of 2005 to 2005 in China in the fourth quarter of the RMB exchange rate transmission test whether with asymmetric effect.A vector autoregressive model is established to analyze the contribution rate of different direction(appreciation and depreciation)of exchange rate volatility to the change of price level,to test whether there are significant differences between them.Through the inspection found that the RMB exchange rate transmission exists obvious impact on the price level of asymmetric properties: the exchange rate depreciation has contributed significantly greater than the contribution rate of appreciation of price changes.Thus,it can be seen that the appreciation of the RMB exchange rate cannot restrain domestic upward inflationary pressure.On the contrary,the depreciation of the exchange rate will promote the formation of inflation.Therefore,we can learn that the exchange rate appreciation stage will not bring domestic deflationary pressure,which can guarantee the independence of monetary policy to some extent.But at the same time,we should be aware that the devaluation of the RMB will bring about the inflation problem while bringing the export boom.