The Relationship Between Rmb Internationalization And Exchange Rate Pass-through

To strengthen RMB’s international status and enhance China’s international competitiveness,China has implemented a series of political and economic initiatives since the 1990s.The process of RMB internationalization has achieved great leaps,one after another,from the beginning of combination of exchange rate in 1993 to the end of RMB officially added to SDR(special drawing right)on October 1,2016,so it’s increasingly important to consider the influence of RMB internationalization in terms of the formulation of monetary policy.Most domestic work focus on the qualitative research,which discuss the advantage and disadvantage of RMB internationalization to China society,the path of realizing RMB internationalization,the hazards hiding in it and so on.Doing a quantitative research,this paper for the first time applies RMB internationalization index to the regression model to discuss the relationship between RMB internationalization and exchange rate pass-through.Using indexed data and industry-classified real data,the paper analyzes the influence of RMB internationalization on exchange rate pass-through from both macro and industry-classified view,taking GDP changes into consideration as well.The research shows that there is a certain extent imbalance in import and export market for foreign currency(dollar)taking the leadership in bid price,and the exchange rate pass-through is negative in both sides.The coefficient of RMB internationalization index is positive which shows that RMB internationalization and exchange rate fluctuations have different influence on import and export prices.This shows that RMB internationalization weakens the leading role of foreign currency(dollar)in bid price,and meanwhile balances and improves China trade settlement system constantly.This paper also shows that the pass-through of exchange rate,and the influence RMB internationalization has on it,both varies among different industries,due to their different manufacturing and marketing mode.And the RMB internationalization will promote the influence of exchange rate fluctuations on price,when the deals using RMB as bid currency reach a certain proportion.When make the optimal monetary policy,we should take the mechanism how RMB internationalization affect exchange rate pass-through under different industries and background into consideration.