Empirical Analysis of import and export price pass

[Abstract] empirical analysis shows that the RMB exchange rate on international trade in the transmission of higher export prices, import prices to pass on the lower level. Exchange rate on export and import prices differ from industry to pass the margins of international contract and trade barriers. import prices due to exchange rate changes on export prices much lower than the transmission, the RMB appreciation may have little effect on imports, while China's exports will have a greater negative impact.

[Keywords] import and export price the RMB exchange rate pass prices

Introduction
In recent years, expanding China's foreign trade surplus and foreign exchange reserves increased dramatically, to the balanced development of China's economic and policy-making has brought a lot of pressure. Meanwhile, China's huge trade surplus has also drawn the United States, European Union and other countries of the blame, they said, because the yuan undervalued, which makes a substantial increase in Chinese exports, and led to a large number of these countries foreign trade deficit, therefore, since 2002 years, the international community to pressure for appreciation of international trade continued .2005 RMB exchange rate formation mechanism in a major adjustment, international trade, the appreciation of the RMB exchange rate since then into the channel, as the RMB has appreciated against the U.S. dollar to about 20 % exchange rate change through two aspects to affect a country's import and export trade: First, exchange rate changes affect import and export commodity prices, import and export price changes in turn affect the import and export volume changes, thus affecting the trade and trade balance. To learn more about international trade, whether the RMB exchange rate changes will impact China's imports and exports and significantly improve China's huge trade surplus, must be aware of changes in exchange rates after the two channels of impact in this paper attempts to impact of exchange rate on import and export analysis of the first channel, that explore the changes in international trade, the RMB exchange rate affect the extent to which China's import and export prices, which for the understanding of international trade, import and export of the RMB exchange rate changes on the role, to develop an appropriate exchange rate and trade policy is of great significance.

Empirical Analysis
Model Selection and Data Description
According to law of one price, China's import prices should be related to the exchange rate and foreign prices, and are:
IMP = E × FP (1)
One representative of the domestic import prices IMP, E behalf of the international trade in renminbi exchange rate, defined as a composite unit of foreign currency / RMB, FP behalf of the foreign price index, while taking into account the increase in our income levels will lead to increased demand for imports, thereby raising import prices, domestic income Y, as this will affect the prices of imported products in China one of the factors of (a logarithmic type on both sides to get the import price of the log-linear equation as follows:
LnIMP = LnE + LnFP + LnY (2
Similarly, China's export prices can be expressed as:
LnXP = LnE + LnDP + LnFY (3
One representative of the domestic export prices of XP, E on behalf of the RMB exchange rate in international trade, DP behalf of the domestic production price index, FY behalf of foreign income.

According to (2 (3-type, the eventual establishment of import prices and export prices of the measurement model is as follows:
LnIMP = a0 + a1LnE + a2LnFP + a3LnY + ε0
LnX = β0 + β1LnE + β2LnDP + β3LnFY + ε1 (4
According to (4-style, this use from 1999 to 2008 monthly data, analysis of international trade, the RMB exchange rate changes on China's import and export price pass-through effect of which import and export prices for 2005, the price index for the 100, said international trade in yuan nominal effective exchange rate exchange rate E is said to use the foreign price of foreign producer price index, said FP, DP domestic price index of domestic producer price index PPI use, said the domestic income and foreign income FY Y respectively, said domestic GDP and foreign GDP.

Unit root test
To avoid spurious regression problem and, during the dynamic regression model fitting, we must first test the stationarity of the sequence. In this paper, the ADF test method (4 of each type of stationary sequences tested (Table omitted. LnIMP, LnE , LnFP, LnCGDP, LnXP, LnPPI, LnGDP the seven levels of the value of data sequence at the 5% significance level are not smooth, but smooth first-order difference sequence, indicating that they are I (1 sequence.

Cointegration
Research by the unit root test shows that the seven variables are first-order single whole, and can (4-type cointegration test to analyze the variables between the long-term cointegration relationship exists due to the model of import prices and export prices, respectively, the model involving four variables, it is not appropriate to use a smooth two-step test (this method is applied to test the relationship between two variables, this variable using Johansen method of cointegration test.

Trace test and maximum eigenvalue test showed that the 5% significance level, import prices, nominal effective exchange rate, foreign prices and domestic income between the existence of a cointegration equation normalized long-term cointegration equation is:
LNIMP =-0.1730LNE - 1.1354LNFP + 0.6772 LNCGDP +7.4379 (5
(0.25907 (0.42028 (0.11094 (1.82314
Trace test and maximum eigenvalue test showed that the 5% significance level, the export price, the nominal effective exchange rate, domestic producer price and foreign income there is a cointegration between the equation normalized long-term cointegration equation is: Links to free download http://www.hi138.com
LNXP = 0.7593LNE + 0.7453LNPPI + 0.0905LNGDP -2.7969 (6)
(0.26827 (0.32136 (0.24291 (1.48210
By the two cointegrating equations can be seen that the import price on the exchange rate elasticity of -0.173, that is, nominal effective exchange rate rose 1 percentage point each, import prices fell 0.173 percentage points of export prices to exchange rate elasticity of 0.759, that international trade the RMB exchange rate rose 1 percentage point each, export prices rose 0.759 percentage point, which is consistent with the theoretical analysis, that the currency appreciation, lower import prices, export prices, which means that international trade in the RMB exchange rate appreciation on their progress Export prices are expected to play a role in the transmission, which could prompt China to increase imports and exports declined, on the one hand a certain extent reduce the long-standing trade surplus with China, while Chinese exports may affect the production, and thus to employment with to a negative impact.

Error correction model
In determining the import prices, international trade, the RMB exchange rate, foreign prices, foreign long-term equilibrium relationship between GDP and export prices, international trade, the RMB exchange rate, domestic production prices, domestic GDP, long-term equilibrium relationship. ECM ECMA, respectively, and import prices model and the export price model error correction term to reflect the import prices and export prices deviate from long-term stable relationship, the specific expression is:
ECM = LNIMP + 0.1730 * LNE + 1.1354 * LNFP - 0.6772 * LNY - 7.4379
ECMA = LNXP - 0.7593 * LNE - 0.7453 * LNDP - 0.0905 * LNFY + 2.7969 (7
Impulse response analysis
Impulse response function describes an endogenous variable on the error response. Specifically, it depicts, in the disturbance on the size of one standard deviation increase the impact of the endogenous variables of the current value and future value of the impact, according to get the model error correction model (7, we model the impulse response analysis, the import prices and export prices on the international trade in principle for the RMB exchange rate response: When a positive shock to the exchange rate, import prices caused by the response of is negative, and the long duration, increasing the degree of influence, continued until after a period, indicating that the exchange rate impact greater impact on import prices, and long-term impact of a standard deviation of the exchange rate impact will be positive bring positive effects to the export price, but the effect is very small, slow increase in the previous three months, then declined more slowly, in effect nine months after the start of 0, which shows the exchange rate has little effect on export prices and continuing short time, mainly concentrated in the 3 affected and 4 months.

Conclusion
This article uses the 1999 to 2008 monthly data, by co-integration test, to establish error-correction model and impulse response analysis to study the international trade in renminbi exchange rate changes on China's import and export price pass-through effect, and found: 1, in the long run China's exchange rate movements on import prices pass-through effect is negative, the export price pass-through effect is positive, consistent with the theoretical analysis, and, import prices on the exchange rate elasticity (absolute value of only 0.173, less than the export price on the exchange rate elasticity of 0.759 This shows the impact of exchange rate on export prices than import prices is much greater impact In addition, Research also shows that import prices and foreign production is inversely proportional to prices, and domestic income is proportional to the production of export prices and domestic prices is proportional to the Foreign income is proportional to the .2, exchange rate changes on import prices and export prices reverse pass-correction mechanism exists, but the response speed is very slow long-run equilibrium when a positive shock to the exchange rate, import prices will have negative to the response, and long duration, export prices will be positive response, but the duration is short, and relatively weak response.

From the empirical test results, the nominal effective exchange rate for import and export prices had resulted in a pass-through effect in line with theoretical expectations that the yuan appreciation makes exports prices and lower import prices, export prices, especially the transfer of up to 0.76, which means that of the RMB exchange rate changes effective on the impact of China Import and Export prices are very significant, especially exports, the international trade in renminbi exchange rate changes on China's import and export does play a very significant impact which can largely explain why the face of China's huge trade surplus, the United States and other countries would have been imposed on RMB appreciation pressure, and they hope that through international trade, a substantial appreciation of the RMB exchange rate, greatly reducing the price of Chinese exports competitive, thereby reducing China of exports. Again, this also explains why the Chinese government has long been very cautious about revaluation of the yuan has emphasized that the RMB exchange rate adjustment in international trade initiative and control, due to exchange rate changes on import prices much lower than the transmission export prices, RMB appreciation may have little effect on imports, while exports to China have a greater negative impact. Links to free download http://www.hi138.com