Study On The Effect Of Global Value Chain Position On Exchange Rate Pass-Through

With the continuous advancement and evolution of global production networks and the new round of industrial and technological revolutions,global value chains(GVCs)have become one of the distinctive features of the world economy,and the rise of the GVC position has not only led to dramatic changes in the world economic landscape,but also has a significant impact on the production and trade linkages between countries.With China’s increasing participation in GVC and the gradual advancement of exchange rate reform,the study of how RMB exchange rate changes affect trade from the perspective of GVC is of great practical significance for China’s opening up and exchange rate reform.The impact of exchange rate on trade is mainly realized by affecting the prices of import and export commodities,i.e.,the exchange rate transmission channel.Therefore,the relationship between GVC and RMB exchange rate pass-through is an issue worth exploring.Since manufacturing industries occupy a dominant position in China’s export product structure,this paper uses the Chinese customs database and industrial enterprise database to obtain the export data of Chinese manufacturing enterprises from 2000-2014,matches several databases such as UIBE GVC Indicators and UN Comtrade to measure the GVC indicators at the enterprise level,and by using a multidimensional fixed effects model.empirically analyzes the impact of firms’ GVC position on the level of exchange rate pass-through of export prices.Finally,this paper further differentiates the two-way GVC participation mode and examines the exchange rate pass-through effects of two GVC participation modes.The findings show that:(1)incomplete exchange rate pass-through exists at the enterprise level in China,and the climbing GVC position of enterprises exacerbates this incomplete pass-through phenomenon,i.e.,the higher the GVC position of enterprises,the greater the exchange rate elasticity of export prices and the lower the degree of exchange rate pass-through.(2)The heterogeneity at the enterprise level has different effects on exchange rate pass-through.According to further research on the differences of enterprises in terms of trade mode,ownership type and product technology content,it is found that the exchange rate pass-through effect of processing trade is more significantly affected by the negative impact of GVC position,non-foreign enterprises are more negatively affected than foreign enterprises,and the impact of GVC position of enterprises on the exchange rate pass-through effect of high technology products is significantly negative,and there is no significant impact on low technology products.(3)After decomposing the participation in GVC into forward participation and backward participation,it is found that GVC mainly influences exchange rate pass-through through forward participation.Based on the above research findings,the paper concludes with relevant policy recommendations for Chinese monetary authorities to formulate exchange rate policies,improve exchange rate system reform,strengthen scientific and technological innovation,and enterprises to improve their GVC position and enhance technological upgrading.