The Yuan’s Exchange Rates and Pass-through Effects on the Prices of Japanese and US Imports

Yuqing Xing

Trade Working Papers from East Asian Bureau of Economic Research

Abstract: This paper estimated the pass-through effects of yuans exchange rates on prices of the US and Japanese imports from the Peoples Republic of China (PRC). Empirical results show that, a 1% nominal appreciation of the yuan would result in a 0.23% increase in prices of the US imports in the short run and 0.47% in the long run. Japanese import prices were relatively more responsive to changes of the bilateral exchange rates between the yuan and the yen. For a 1% nominal appreciation of the yuan against the yen, Japanese import prices would be expected to rise 0.55% in the short run and 0.99%, a complete pass-through, in the long run. The high degree of pass-through effects were also found at the disaggregated sectoral level : food, raw materials, apparel, manufacturing, and machinery. However, further analysis indicated that the high pass-through effects in the case of Japan were mainly attributed to the PRCs policy to peg the yuan to the United States (US) dollar, and that the dollar is used as a dominant invoicing currency for the PRCs exports to Japan. After controlling the currency invoicing factor, I found no evidence that the yuans cumulative appreciation since July 2005 was passed on to prices of Japanese imports at either the aggregate or disaggregated levels. The estimated low pass-through effects of the yuans appreciation suggest that a moderate appreciation of the yuan would have very little impact on the PRCs trade surplus.

Keywords: exchange rates; import prices; yuan appreciation; currency policy (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.eaber.org/node/22802 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 301 [REDIRECT LOOP] Moved Permanently (http://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802 [301 Moved Permanently]--> https://www.eaber.org/node/22802)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eab:tradew:22802

Access Statistics for this paper

More papers in Trade Working Papers from East Asian Bureau of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Shiro Armstrong ().