An empirical study of exchange rate pass-through in China
This paper seeks to estimate exchange rate pass-through in China and investigate its relationship with monetary policy. Linear and VAR models are applied to analyze robustness. The linear model shows that, over the long run, a 1% appreciation of NEER causes a decline in the CPI inflation rate of...
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| Format: | Article |
| Language: | English |
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Economists' Association of Vojvodina
2012-01-01
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| Series: | Panoeconomicus |
| Subjects: | |
| Online Access: | http://www.doiserbia.nb.rs/img/doi/1452-595X/2012/1452-595X1202135J.pdf |
| _version_ | 1818334312327544832 |
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| author | Jin Xiaowen |
| author_facet | Jin Xiaowen |
| author_sort | Jin Xiaowen |
| collection | DOAJ |
| description | This paper seeks to estimate exchange rate pass-through in China and investigate its relationship with monetary policy. Linear and VAR models are applied to analyze robustness. The linear model shows that, over the long run, a 1% appreciation of NEER causes a decline in the CPI inflation rate of 0.132% and PPI inflation rate of 0.495%. The VAR model supports the results of the linear model, suggesting a fairly low CPI pass-through and relatively higher PPI pass-through. Furthermore, this paper finds that, with the fixed exchange rate regime, CPI pass-through remains higher. The exchange rate regimes influence on CPI pass through, combined with the fact that appreciation diminishes inflation, suggests that the Chinese government could pursue a more flexible exchange rate policy. In addition, reasons for low exchange rate pass-through for CPI are analyzed. The analysis considers price control, basket and weight of Chinese price indices, distribution cost, and imported and non-tradable share of inputs. |
| first_indexed | 2024-12-13T14:05:32Z |
| format | Article |
| id | doaj.art-121bbd49c40643318d9321da217db9c6 |
| institution | Directory Open Access Journal |
| issn | 1452-595X |
| language | English |
| last_indexed | 2024-12-13T14:05:32Z |
| publishDate | 2012-01-01 |
| publisher | Economists' Association of Vojvodina |
| record_format | Article |
| series | Panoeconomicus |
| spelling | doaj.art-121bbd49c40643318d9321da217db9c62022-12-21T23:42:36ZengEconomists' Association of VojvodinaPanoeconomicus1452-595X2012-01-0159213515610.2298/PAN1202135JAn empirical study of exchange rate pass-through in ChinaJin XiaowenThis paper seeks to estimate exchange rate pass-through in China and investigate its relationship with monetary policy. Linear and VAR models are applied to analyze robustness. The linear model shows that, over the long run, a 1% appreciation of NEER causes a decline in the CPI inflation rate of 0.132% and PPI inflation rate of 0.495%. The VAR model supports the results of the linear model, suggesting a fairly low CPI pass-through and relatively higher PPI pass-through. Furthermore, this paper finds that, with the fixed exchange rate regime, CPI pass-through remains higher. The exchange rate regimes influence on CPI pass through, combined with the fact that appreciation diminishes inflation, suggests that the Chinese government could pursue a more flexible exchange rate policy. In addition, reasons for low exchange rate pass-through for CPI are analyzed. The analysis considers price control, basket and weight of Chinese price indices, distribution cost, and imported and non-tradable share of inputs.http://www.doiserbia.nb.rs/img/doi/1452-595X/2012/1452-595X1202135J.pdfpass-throughexchange rateconsumer priceproducer pricemonetary policy |
| spellingShingle | Jin Xiaowen An empirical study of exchange rate pass-through in China Panoeconomicus pass-through exchange rate consumer price producer price monetary policy |
| title | An empirical study of exchange rate pass-through in China |
| title_full | An empirical study of exchange rate pass-through in China |
| title_fullStr | An empirical study of exchange rate pass-through in China |
| title_full_unstemmed | An empirical study of exchange rate pass-through in China |
| title_short | An empirical study of exchange rate pass-through in China |
| title_sort | empirical study of exchange rate pass through in china |
| topic | pass-through exchange rate consumer price producer price monetary policy |
| url | http://www.doiserbia.nb.rs/img/doi/1452-595X/2012/1452-595X1202135J.pdf |
| work_keys_str_mv | AT jinxiaowen anempiricalstudyofexchangeratepassthroughinchina AT jinxiaowen empiricalstudyofexchangeratepassthroughinchina |