The Impact Of Intra-Industry Trade Between China And Japan On Exchange Rate Pass-through Effect

With the rapid development of China's economy and the deepening of its openness to the outside world,the trade structure between China and Japan has gradually escalated from traditional inter-industry trade to intra-industry trade,and the level of intra-industry trade between China and Japan has continuously increased.The foreign direct investment activities between China and Japan have also promoted the development of intra-national trade of multinational corporations.Japanese exporters have adopted cost-adjustment adjustments and market pricing in the Chinese market to occupy the market.At the same time,transfer pricing behavior is generated in the internal trade of multinational corporations.The development of intra-industry trade has reduced the influence of bilateral exchange rate fluctuations on the prices of import and export commodities,thus weakening the effect of Exchange Rate Pass-through(ERPT).Based on the theory of international division of labor and the theory of Exchange Rate Pass-through,this paper studies the impact of intra-industry trade level on the Exchange Rate Pass-through effect.This paper firstly combs relevant theories and research literatures,sums up the factors affecting the Exchange Rate Pass-through effect,and on this basis establishes the Exchange Rate Pass-through model in the imperfectly competitive market,and analyzes the influence mechanism of intra-industry trade on the Exchange Rate Pass-through effect.Based on this,this paper analyzes the development status of intra-industry trade between China and Japan,calculates the intra-industry trade index between China and Japan,and uses the autoregressive distribution lag model and rolling window regression method to estimate the size of the Exchange Rate Pass-through effect.From January 1997 to September 2018,the bilateral exchange rate data of the RMB against the Japanese Yen was used to calculate the exchange rate elasticity coefficient of China's import prices from Japan.The empirical results show that the level of intra-industry trade between China and Japan has a significant impact on the size of the Exchange Rate Pass-through effect.The increase in the level of intra-industry trade has reduced the Exchange Rate Pass-through effect in China's import prices.A one percentage point increase in the level of intra-industry trade between China and Japan will reduce the exchange rate effect of imported commodity prices by 0.147 percentage points.Finally,based on the empirical results,this paper puts forward relevant suggestions.China should pay attention to the development of intra-industry trade,improve the level of intra-industry trade,and accelerate the transformation and upgrading of trade structure.Chinese enterprises can adopt product differentiation strategies,enhance the level ofinternational operations,and adopt diversified measures to prevent exchange rate exposure.