An empirical research on the transmission mechanism of RMB exchange rate movement-prices

Abstract

This paper employs two kinds of VAR models based on the direct and indirect pass-through effect of RMB exchange rate movement to investigate the impact of changes of RMB nominal effective exchange rate from August 2005 to October 2009 on domestic prices level. The results show that the transfer effect of import prices index is stronger than the export prices index, however, domestic consumer price is significantly affected by the world price via export price, namely, export price has effect to the domestic price to some extent.