An Empirical Analysis Of RMB Exchange Rate Pass-through To Agricultural Products Price In China

Exchange rate is an important medium for the relative price of domestic and foreign commodities and the transmission of government monetary policy.It is also an important adjustment leverage in international trade.The influence of exchange rate on the price of trading goods is related to stability of domestic prices,adjustment of international balance of payments,implementation effects of monetary policy,competitiveness of trade and the international transfer of economic shocks.Since 2005,as the RMB has implemented a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies,the RMB exchange rate has fluctuated,while the value of RMB has generally appeared on the rise.With the continued opening of China's economy,the impact of changing RMB exchange rate on China's agricultural product prices has become more significant.Therefore,this thesis intends to analyze the pass-through effect of RMB exchange rate changes over the price of China's agricultural products.Both theoretical and empirical research on the effect of exchange rate pass-through to price is fairly rich.From the research scope,early research mostly focused on the exchange rate effect of the overall import and export price and domestic price.Recent studies have focused more on exchange rate changes over different prices such as export prices,import prices,consumer prices and industrial products.However,only a few research focused on the effect of exchange rate pass-through of agricultural products.There are many studies on the asymmetry of transfer effect,but there are few results in discussing the asymmetry of exchange rate pass-through and the asymmetry research on the effect of exchange rate on agricultural products price.By constructing the exchange rate pass-through effect model and using the combination of theoretical and empirical research,this thesis conduct research on the transfer effect of RMB exchange rate changes on the domestic price and import price of China's agricultural products by using the data from January 2005 to December 2017.This thesis consists of five parts.The first part is introduction,which introduces meaning of the topic,the purpose of the research as well as research method and structure.The second part is a literature review.It analyzes the existing research results from the theoretical review of exchange rate pass-through,the incomplete pass-through effect of exchange rate on price,the characteristics of exchange rate pass-through and the pass-through path of RMB exchange rate to agricultural products.This part builds a theoretical foundation for further research.The third part is to theoretically analyze the pass-through mechanism of exchange rate to agricultural products price,and construct theoretical model of exchange rate to agricultural products price under imperfect competition.The fourth part is empirical analysis of the effect of RMB exchange rate on China's agricultural products price transmission,which include three steps:first step is to apply cointegration model to explore the long-term equilibrium relationship between RMB exchange rate and China's agricultural products price.The results show that the RMB exchange rate has a greater effect on China's domestic agricultural products price than on imported agricultural products in the long run.The second step is to apply vector error correction model and impulse response in order to analyze the short-term fluctuation relationship between RMB exchange rate and China's agricultural products price.The key finding is that the impact of RMB exchange rate on agricultural product import prices and domestic prices has a tendency to adjust from short-term fluctuations to long-term equilibrium.Further,the price pass-through coefficient of the RMB exchange rate to total agricultural products,soybeans,corn and wheat was analyzed and the results show that the RMB exchange rate had a significant impact on soybean's price,but the price of corn and wheat had no significant effect.The impact on overall agricultural price is somewhere in between.The last step is to apply threshold regression method to analyze the asymmetry of the exchange rate pass-through effect on the price of domestic agricultural products.When the exchange rate fluctuation is small,the exchange rate change has a failure to transmit the domestic agricultural product price.When exchange rate fluctuation is large,the low exchange rate pass-through is more sensitive to domestic agricultural products price than high level range.The fifth part of this thesis is to summarize research conclusions and policy implications.Based on the results of empirical analysis,this part summarizes the conclusions of the research,provides policy implications,and points out future research issues.