The Influence Of RMB Exchange Rate On Price Level Based On Analysis Of VAR

In recent years, China’s macro economy faced "double high" phenomenon. Fromthe perspective of exchange rate, After the reform of the exchange rate system in2005,RMB exchange rate continued rising, From the point view of price, The increasing ofInflation pressure to bring the influence to the economic development of the domesticeconomy, The double high phenomenon is not an uniform change in internal andexternal value of RMB. As the appreciation of RMB as a way of controlling inflation,its theoretical basis is, when the appreciation of RMB appear, the price of importedgoods will decrease, falling price will affect the domestic commodity prices andconsumer price. So it will appear the phenomenon of inflation. Whether thetransmission mechanism theory of the establishment, if established, how the effect?Study this problem is helpful deeply to understand the relations between price andexchange rate. At the same time, in an open view of economy, Exchange rate is animportant economic index, and the price level is directly related to people’s life quality.From a practical perspective on the impact of exchange rate change on the domesticprice level is of far-reaching significance.Firstly, A systematic literature of transmission mechanism between exchange rateand price. In theory, from the law of one price, the traditional PPP theory of traditionalopen macro economic research to micro perspective factors influencing the exchangerate pass, and then to the analysis of the new open macro economy. Finally, studies areabout the study abroad and domestic measurement in empirical. From the method ofresearch, at the early stage of the research on exchange rate pass through effect,Measurement methods are mostly concentrated in the choice of Dan Fang Chengregression analysis. With the method of time series analysis progress, at present, themain research methods of measurement based on VAR model; From the object of study,a large number of research focused on the study of the developed countries. In recentyears, Research on price transmission effect began to increase; From the research period,lack of the currency exchange rate pass through effect. In order to studycomprehensively the appreciation of RMB transfer effect on the domestic price level toput forward policy suggestions better, The study has practical significance.After the first combination of theory analysis of the appreciation of RMB on thedomestic price index, Summarizing The factors of the current inflation and the exchange rate fluctuation path with this. In reality, the appreciation of RMB does noteliminate the phenomenon of inflation, According to the transmission function theory ofexchange rate, Analysis of the causes of this effect failed to give full play, Thestimulating effect of appreciation may exist on the price at the same time. In theempirical section, using the econometric analysis software EVIEWS5.0on2001to2013monthly economic data in China, the conclusion is the impact of RMB exchange rate onCPI is not significant, but the effect have the strengthening trend, especially after thereform in2005. Then, the testing of exchange rate changes on different price indexes inthe price transmission chain. Finally, according to the results of empirical analysis, theexchange rate appreciation as inflation means to be used with caution, and this is fit tothe theoretical analysis conclusions.