Journal of Economics and Business
ISSN 2615-3726 (Online)
ISSN 2621-5667 (Print)
Published: 02 December 2019
Calculate the Exchange Rate Pass-Through of RMB by Using Disaggregated Data
Shiga University, Japan
Download Full-Text Pdf
Keywords: Exchange Rate, Export Prices Index, Import Prices Index, RMB
In this paper, I analyze the impact of the RMB’s exchange rate fluctuations on export/import prices index, in other words, the RMB’s exchange rate pass-through rate. Existing empirical studies estimating the exchange rate pass-through based on the aggregated of RMB’s exchange rate data. However, these approaches have some major drawbacks. Because different major trading partners have different comparative advantage products to trade, using the aggregated effective exchange rate is not necessarily appropriate. For this reason, I calculate the “Nominal Effective Exchange Rate of RMB’s in Sector (based on the export/import weight)” to verify the relationship between the exchange rate and the export/import prices index. The results reveal that the exchange rate shock on the export/import prices index is different from using aggregated data and disaggregated data.
- Chinn, M. D. (2013). Export and Import Elasticities for Japan: New Estimates. La Follette School Working Paper.
- Dornbusch, R. (1987). Exchange Rates and Price. The American Economic Review. 77(1),93-106.
- Gagnon, J. E. & Jane I. (2004). Monetary Policy and Exchange Rate Pass-Through. Board of Governors of the Federal Reserve System, International Finance Discussion Paper 704.
- Hongyuan, Z., & Dawei L. (2014). Industry-specific Real Effective Exchange Rates of RMB and It’s Impact on Each Industry’s Export Volume of China. The research of empirical economic technology, 11, 37-52.
- Jose, M.C., & Linda, S. G. (2005). Exchange rate pass through into import prices. Review of Economics and statistics.
- Kimura Yosuke (2018). Adjustment Process of Exchange Rate and International Trade Balance. Policy Research Institute, Ministry of Finance, Japan discussion paper, No.73,53-60.
- Lee J., Yi B.C. (2006). Industry level Real Effective Exchange Rates for Korea. Bank of Korea, No.9, 143-185.
- Linda, S. G. (2004). Industry-Specific Exchange Rates for the United States. FRBNY Economic Policy Review, 10(1), 1-16.
- Marazzi Mario, & Nathan Sheets (2007). Declining Exchange Rate Pass-Through to U.S. Import Prices: The Potential Role of Global Factors. Journal of International Money and Finance, 26, 924-947.
- Obstfeld, M., & K. Rogoff (1996). Exchange Rate Dynamics Redux. Journal of Political Economy, 3, 624-660.
- Otani Akira, Shigenori Shiratsuka, &Toyoichiro Shirota (2005). Revisiting the Decline in the Exchange rate pass-through: Further Evidence from Japan’s import Prices. Institute for monetary and economic studies discussion paper, No.2005-E-6, Bank of Japan.
- Sasaki Yuri (2013). The Exchange Rate Pass-Through and Market Power of Japan’s Car export prices. RIETI Discussion Paper Series 13-J-052.
- Shioji Etsuro, & Taisuke Uchino (2010). Construction of a Goods-group Level Nominal Effective Exchange Rate Data Set and Re-examination of the Exchange Rate Pass-Through in Japan. The Economic Research, 61, 47-67.
- Taylor, J. B. (2000). Low Inflation, Pass-Through, and the Pricing Power of Firms. European Economic Review, 44, 1389-1408.