Research On RMB Exchange Rate Pass-through Into Beijing Prices

Exchange rate extensively involves several economic issues, as a result, it playsvery important role in macro-economic system. This paper studied on exchange ratepass-through into prices.After classifying and criticizing the previous papers on exchange ratepass-through into prices, it put forward a new study view that exchange ratepass-through into religion prices. So this paper draws lessons from the study methodof McCarthy, adopting VAR model and taking variables from five aspects includingcommodity market supply and requirement, money supply, exchange rate and prices.The contents of research are exchange rate pass-through into Beijing general prices,and clothing and food specific prices along the pricing chain to investigate whetherthe effects are significant and what is the degree and direction of pass-through.Whether it is significant that the pass-through into different types of commodity, andwhether it is similar in degree. What is the process and way of interaction betweenexchange rate changes and Beijing prices, namely what are the mechanisms ofpass-through.Finding exchange rate pass-through to prices in Beijing is limited according toresearch. The descending order of comprehensive effects of influences on the threeprices is outer shock，money supply, exchange rate factor and output gap exceptthemselves. Compared to the Impulse Response and Variance Composition results, theeffects of exchange rate pass through to clothes and food prices are not that much onthe whole; On comparison, food prices have more response than clothes prices; RMBexchange rate changes pass through mechanisms are importing products, cost, wages,income, substitution and expecting mechanism.In conclusion, it is advisable that taking the relative factors into accountcomprehensively when making policy, and taking less concerning on the influence ofexchange rate on the basis of summary of the whole passage. What is more, it makessome advises on decreasing the imported inflation, caring about the relationshipsbetween supply and demand of national products, making sure the money supplyadapting to economic growth and strengthen management of the total amount and theflow direction of actually utilized foreign capital to control the price level.