Research On RMB’s Foreign Exchange Rate Pass-Through Into China’s Export Prices

Since the new round reform of the RMB exchange rate which started from 21st July 2005, RMB exchange began to rise unilaterally from 8.11 to 6.0969 per dollar at the end of 2013. The cumulative appreciation of RMB is more than 33 percent. The RMB is not only in the trend of appreciation, but also in the expansion of fluctuation range. What is more, the trade surplus of China enjoyed the unexpected high growth phase in which we find non-related exchange rate phenomena. To figure out the non-related exchange rate phenomena, we have firstly to do some research of transmission effect of exchange, while few paper have focused on the effect of nominal effective exchange rate to export price since the reform of RMB exchange rate in 2005.The paper analyzes how the change of RMB exchange rate affected the export price since the reform in 2005 based on the research of previous literatures. Firstly, the paper sets up theoretical framework of exchange rate pass-through and explains microscopic mechanism of the model. Then we get the equation for empirical test. Furthermore, we process original customs data and set up the index of whole and classified export price. Finally, we use time series model and panel data model to test the index.The results of time series model indicate that, first, when the effective exchange rate of RMB increase 1%, the overall export prices will rise by 0.178%, which shows that there exists incomplete exchange rate pass-through phenomena; After that, the increase of fluctuation of RMB rate will lead to the decrease of export prices, but within very small range, of which the probable reason is that the fluctuation of RMB is too small to greatly affect the price decisions of export enterprises; Furthermore, from the perspective of HS industry segmentation, the influence of the fluctuation of RMB rate changes among different industries, including incomplete, reversion and excessive pass-through, and this paper analyses several representative industries in detail.The results of panel model indicate that, first, different from the conclusions of time series model, pool regression and fixed-effect regression have similar results, which shows that the fluctuation of RMB rate does not have that much distinct impact on different industries; Second, the coefficients of current item and lagged item are both significant, which indicates that the change of RMB rate and production cost have lagged influence on export prices, and this is also a new finding from panel model; Further, controlling the lagged items and time fixed-effect, the panel model still displays the similar result to the baseline model, which strengthen the robustness of our research.In the last, based on theoretic and empirical analysis, and the real economy of our country, this paper also provides some related policy recommendations.