14 / 2015-08-28 12:39:45

The Research on the Asymmetry of Exchange Rate Pass-through Effect

Domestic price level; Exchange rate pass-through; Asymmetry

This paper will explore the asymmetry effect of RMB change’s impact on the domestic price level from January 2002 to December 2014, by introducing the dummy variables to show the different directions and scope of exchange rate fluctuation. We’ve drawn the following conclusions. Firstly, compared with appreciation, when RMB devaluated, the exchange rate pass-through effect was greater. Secondly, when the fluctuation scope of exchange rate became larger, pass-through effect was more obvious. The study expects to make reasonable understanding for the influences on the domestic price level caused by exchange rate fluctuation and provide the theoretical support for central bank to make reasonable monetary policy.