TITLE:
An Empirical Study on the Pass-Through Effect of RMB Nominal Effective Exchange Rate on Import Price
AUTHORS:
Alin Xia
KEYWORDS:
Exchange Rate Pass-Through, Import Price, Volatility
JOURNAL NAME:
Modern Economy,
Vol.8 No.2,
January
26,
2017
ABSTRACT: Starting from ERPT model,
the paper decomposes RMB nominal effective exchange rate published in BIS into
level and volatility, and analyzes the pass-through effects of RMB nominal
effective exchange rate into import price from level and volatility under GARCH
model. The conclusions are that, the pass-through effect of RMB nominal
effective exchange rate to the level of import
price is not complete, and the volatility of RMB nominal effective exchange
rate has a negative impact on the volatility of import price and also has a
time lag. Error correction mechanism shows that it needs about 8 months
for import price to return to a balanced level after the changes of exchange
rate.