| In July 2005,the Central Bank's exchange rate reform made the RMB exchange rate more flexible and the RMB was in the appreciation channel.The continued appreciation of the RMB has had some impact on domestic prices.Until the outbreak of the financial crisis in 2008,its negative impact spread to China,resulting in the devaluation of the RMB exchange rate in early 2009,and the domestic economy has experienced a decline.After the crisis,the domestic economy has developed rapidly,the international status of the RMB has gradually improved,and the process of RMB internationalization has rapidly increased.On October1,2016,after the RMB formally joined the SDR,the exchange rate depreciated in the short term.And the exchange rate to the domestic price transfer research,has become one of the current focus.Under the current economic opening conditions,exchange rate is an important price mechanism,and exchange rate changes have a transitive nature to domestic prices.Therefore,it is very necessary to study the effect of exchange rate on price transmission in order to maintain reasonable price fluctuation.Therefore,this paper studies the effect of incomplete exchange rate transmission on domestic prices.Firstly,the paper summarizes the research background and significance of the research and summarizes the relevant research results.Secondly,the concept of exchange rate,price and exchange rate transfer are defined.Then,the trend of exchange rate and domestic price index is analyzed,and the transmission path of exchange rate to price is explored.Then through the VAR model and Cointegration test,the paper is tested empirically.In view of the fact that many scholars have chosen a single price index for this study and have not studied the domestic price index systematically.Therefore,this paper selects domestic prices,namely,CPI,PPI and RPI,all of which were studied from July 2005 to June 2017.The results show that the nominal effective exchange rate of RMB is not complete and the transmission effect is small.At the same time,the results also show that the transmission coefficient of the nominal effective exchange rate of the RMB to the PPI,the retail price index and the consumer price index is less than1,and is-0.379952,-0.337271and-0.149921 respectively.Secondly,the nominal effective exchange rate of RMB is negative to the domestic price index transmission,and the transmission effect is different.Thirdly,the results of pulse response and variance decomposition show that the nominal effective exchange rate of RMB has certain transmission effect on PPI and CPI.Moreover,the nominal effective exchange rate contributes more to the producer price index of industrial products than the nominal effective exchange rate contributes to the consumer price index.Policy recommendations:Firstly,exchange rate reforms should be undertaken and exchange rate flexibility should be improved.The central bank needs to improve the RMB exchange rate system,promote the reform of the exchange rate mechanism,and make the RMB exchange rate truly a floating exchange rate based on market supply and demand.We will increase the flexibility of the RMB exchange rate.Secondly,we need to adjust the value of the RMB moderately to maintain reasonable fluctuations in domestic prices.If the yuan appreciated,domestic prices would fall.Therefore,under the situation of continuous increase in domestic prices,the RMB exchange rate can be moderately appreciated,and then to a certain extent,the rapid rise in domestic prices can be suppressed,and domestic prices can be reasonably increased to avoid inflation.Thirdly,we should timely regulate the amount of money supply and adjust domestic price levels within a reasonable range.It is of great significance to adjust the money supply reasonably,keep the price in reasonable range,and promote the healthy and steady development of the economy.Fourthly,we should intensify the research on the effect of exchange rate transmission and make a set of measures of exchange rate transmission effect. |
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