Research On RMB Exchange Rate Pass-Through Into Domestic Prices

In the highly globalized world economy,exchange rate plays a kernel role in maintaining the internal and external balance of a country's economy,simultaneously it is of great significance in seeking the way to achieve development and stability of the national economy,coordinating the economic interests of different countries.As a result,the issue of exchange rate pass-through,which focusing on the transfer process from exchange rate to domestic price,became an important part of the international economic theory.China's current exchange rate management system has been committed to the market-oriented reform;meanwhile,the exchange rate of the RMB has also been more and more easily fluctuated by the changes of the international economy situations.On the other hand,as a result of the shift of national economic strategy,the adjustment of China's economic structure has been accelerated in resent years,in particular,the development of tertiary industry is so significant that has an increasing and considerable impact on the whole economy situation.Therefore,it is a necessary subject to explore the role of the tertiary industry in exchange rate transfer mechanism,find out the relationship between proportion of the service industry and the exchange rate pass-though effect.Against this backdrop,based on China's economic data from 1996 to 2016,this paper investigates into the RMB exchange rate pass-through by using VAR and pulse response analysis,confirms that RMB exchange rate pass-through is incomplete,and the pass-through effect of CPI is significantly less than that of PPI.Besides,the proportion of service industry has a significant impact on the exchange rate transfer coefficient.Specifically,the higher the proportion is,the smaller the RMB exchange rate transfer coefficient will be,the weaker the exchange rate transfer effect will become.