%0 Journal Article
%T An empirical study of exchange rate pass-through in China
%A Jin Xiaowen
%J Panoeconomicus
%D 2012
%I Economists' Association of Vojvodina
%R 10.2298/pan1202135j
%X This paper seeks to estimate exchange rate pass-through in China and investigate its relationship with monetary policy. Linear and VAR models are applied to analyze robustness. The linear model shows that, over the long run, a 1% appreciation of NEER causes a decline in the CPI inflation rate of 0.132% and PPI inflation rate of 0.495%. The VAR model supports the results of the linear model, suggesting a fairly low CPI pass-through and relatively higher PPI pass-through. Furthermore, this paper finds that, with the fixed exchange rate regime, CPI pass-through remains higher. The exchange rate regimes influence on CPI pass through, combined with the fact that appreciation diminishes inflation, suggests that the Chinese government could pursue a more flexible exchange rate policy. In addition, reasons for low exchange rate pass-through for CPI are analyzed. The analysis considers price control, basket and weight of Chinese price indices, distribution cost, and imported and non-tradable share of inputs.
%K pass-through
%K exchange rate
%K consumer price
%K producer price
%K monetary policy
%U http://www.doiserbia.nb.rs/img/doi/1452-595X/2012/1452-595X1202135J.pdf