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The Pattern of Exchange Rate Effects on Chinese Prices, 1980–2002

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  • Xuxin Yu

Abstract

This study sheds light on the current debate on the effect of the urged appreciation of the Chinese yuan by examining the linkage between currency‐value changes and domestic producer prices, using annual data from 14 broad industry sectors in China for the years 1980–2002. A structural break analysis implies that only in the past decade, when price liberalization was essentially achieved and the deepening of state‐owned enterprise reform was in place, has an economic system in which prices respond to exchange rate fluctuations via the expected market mechanism been set up in China. Incomplete exchange rate passthrough to domestic prices is estimated and is found to vary across industries and over time. The variations are suggested to be explained by a set of variables that characterize market competitiveness, infrastructure development, and the increasing proportion of nonstate‐owned enterprises in the economy.

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  • Xuxin Yu, 2007. "The Pattern of Exchange Rate Effects on Chinese Prices, 1980–2002," Review of International Economics, Wiley Blackwell, vol. 15(4), pages 683-699, September.
    • Handle: RePEc:bla:reviec:v:15:y:2007:i:4:p:683-699
    DOI: 10.1111/j.1467-9396.2007.00689.x
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    References listed on IDEAS

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    1. Yushi Yoshida & Shinji Takagi, 1999. "Exchange Rate Movements and Tradable Goods Prices in East Asia: An Analysis Based on Japanese Customs Data, 1988-98," IMF Working Papers 1999/031, International Monetary Fund.
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    Cited by:

    1. Han, Jun & Liu, Runjuan & Ural Marchand, Beyza & Zhang, Junsen, 2016. "Market structure, imperfect tariff pass-through, and household welfare in Urban China," Journal of International Economics, Elsevier, vol. 100(C), pages 220-232.
    2. Straub, Roland & Thimann, Christian, 2010. "The external and domestic side of macroeconomic adjustment in China," Journal of Asian Economics, Elsevier, vol. 21(5), pages 425-444, October.
    3. Nilanjan Banik & Khanindra Ch. Das, 2014. "The Location Substitution Effect: Does it Apply for China?," Global Business Review, International Management Institute, vol. 15(1), pages 59-75, March.
    4. Xuxin Yu, 2007. "The Industry Determinants of Exchange Rate Pass-Through to Chinese Domestic Prices, 1980-2002," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(3), pages 393-408.

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