Exchange Rate Fluctuation Pass Through To Export Commodity Price And Quantity

RMB's exchange rate formation mechanism has been continuously improved since 2005,and the RMB's exchange rate against major currencies has become more flexible.Under the background of increasing exchange rate fluctuations,the impact of RMB exchange rate on China's export trade needs to be further studied and observed in more detail.This paper decomposes the impact of exchange rate fluctuations on the export value into the exchange rate to the price and the exchange rate to the quantity.The exchange rate price transfer effect is the result of the firm's pricing decision.This paper attempts to discuss these two effects theoretically and gives the results of empirical tests.In the theoretical part,starting from the maximization of manufacturer's pricing profit,the partial equilibrium model of Yang(2007)is expanded,and the main factors affecting the price and quantity transmission of export commodities are the sensitivity of demand price elasticity and demand price elasticity to price changes.Under the different conditions of demand elasticity,there are differences in the degree of exchange rate to the price and quantity transmission.The theoretical derivation shows that the exchange rate is not completely and asymmetrically transmitted to the price.When the elasticity of demand is greater,the effect of price transmission is smaller,and there is an asymmetric feature in the direction of appreciation and devaluation,and the fluctuation of exchange rate.The theoretical model also shows that the transmission of RMB exchange rate fluctuations to the quantity of export commodities is also incomplete.In the empirical part,this paper deals with the price and quantity data of 1170 kinds of HS 8-digit products exported from China from January 2000 to December 2011 in Japan,and this paper uses a fixed effect model for analysis.In terms of price transmission effects,this paper finds that there is incomplete price transmission and the price transmission rate is 0.685.There is asymmetry transmission of the rate.During the devaluation,the price transmission rate is 0.758,which is higher than the appreciation price transmission rate of 0.639;the exchange rate of the exchange rate when the exchange rate fluctuated significantly is 0.845,which is higher than the price transmission rate of 0.607 when the price fluctuates slightly.In addition,through the matching of export commodities,the research products are divided into 26 CICC industries,and the exchange rate of the industry is also heterogeneous.Further using arc elasticity to group products,it is found that the magnitude of price transfer effects is inversely related to the size of commodity demand elasticity.In terms of quantitative transfer effects,this article finds that the quantitative transfer effect is smaller because the price change is relatively small,and therefore the quantity delivered is smaller,about 0.168.The quantitative transfer rate of goods with a large demand elasticity is 0.179,and the transfer rate of inflexible goods is 0.116.Due to the incomplete exchange rate effect mentioned above,exchange rate changes will not be fully reflected in the amount of export trade.This is also the reason why people generally observed in the past several years that the appreciation or devaluation of the RMB did not bring corresponding adjustments to export trade.Based on this study,we recommend that exporting firms adjust and optimize product mix,and enhance design capabilities and technological innovations,strengthen non-price competitiveness of products as well to better cope with the potential impact of exchange rate fluctuations on the potential production and sales impacts that manufacturers may bring.At the same time,manufacturers should also evade exchange rate risk by using foreign exchange futures,distant swap contracts,and other tools.