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An Empirical Study on the Pass-Through Effect of RMB Nominal Effective Exchange Rate on Import Price
Jinan University, Guangzhou, China
- 1 Jinan University, Guangzhou, China
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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 im port 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 s hows that it needs about 8 months for import price to return to a balanced level after the changes of exchange rate.
KeywordsExchange Rate Pass-ThroughImport PriceVolatility
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