The Study on Rmb Appreciation Pass—through Effect to Chinese Inflation
|School||Xinjiang University of Finance and Economics|
|Keywords||RMB appreciation Inflation pass-through effect Nominal effectiveexchange rate consumer price index|
In recent years, RMB exchange rate appreciation and inflation appear inChina.They havean effect to people’s life and social production.How to deal with inflation and RMB exchangerate has become China’s macroeconomic regulation problem.According to the traditionalfinancial theory, the exchange rate and the price should exist negative correlation relationship.Therefore, can RMB exchange rate appreciation ease inflation pressure?How about theinfluence degree and the effect speed?Does it exist time lag effect? And what is the effect toDomestic monetary policy? How should the country administer the inflation? These havebecome the hot issues in academia. To solve these problems, we must clearly understand theexchange rate—price transmission mechanism. As Choudhri and Hakura(2006)stated,thestudy on the influence degree and effect speed that exchange rate fluctuation imposes onimport prices and domestic prices has become an important policy content in the policyimplementation of currency and exchange rate.The text introduces exchange rate—price transmission effect theory, including theexchange rate completely transmission theory and exchange rate incompletely transmissiontheory.Then the article qualitatively analyses the transmission effect that RMB exchange rateappreciation imposes on inflation, and according to transmission channel between theexchange rate and domestic prices, the article analyses the direct and indirect transmissionmechanism between RMB appreciation and domestic inflation.By constructing the exchangerate-price transmission model,the paper selects reasonable variables and uses VAR model forempirical test.Through the impulse response function and variance decomposition、cointegration test, the article analyses the short and long conductive effect that RMBappreciation has imposed on domestic inflation.Finally the article analyses the empiricalresults and put forward some suggestions.The empirical result indicates that the short and long transmission effect which RMBnominal effective exchange rate imposes on domestic inflation is not entire.Then from theRMB exchange rate mechanism, the insufficient domestic demand, import industry pricingpower and imported goods structure,the article analyses the reason.Finally put forwardrelevant policy suggestions, such as, enstrengthen the control of inflation, stable inflationexpectations;reinforce the reform of exchange rate system, enhance the RMB exchange rate flexibility;fully stimulate domestic demand,ease RMB appreciation pressure;constantlyoptimize the structure of foreign trade, improve the foreign trade industry pricing power.