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Exchange rates and prices: Evidence from China

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  • Jingtao Yi

Abstract

This article develops a pricing model that incorporates an industrial organization approach with the traditional quantity theory of money to explain the impact of exchange rates on consumer prices. Using time-series data on prices and exchange rates of China, the model replicates the main features of the observed facts: exchange rates influence consumer prices through changing import prices; money supply and output influence consumer prices following the quantity theory. The estimating results show that exchange-rate pass-through to consumer prices is low and increases from the short run to the long run. The extent of pass-through is likely to depend on markup adjustment and marginal costs.

Suggested Citation

  • Jingtao Yi, 2013. "Exchange rates and prices: Evidence from China," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(5), pages 639-657, August.
    • Handle: RePEc:taf:jitecd:v:22:y:2013:i:5:p:639-657
    DOI: 10.1080/09638199.2011.589032
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    References listed on IDEAS

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    1. Peter Hooper & Barbara R. Lowrey, 1979. "Impact of the dollar depreciation on the U.S. price level: an analytical survey of empirical estimates," Staff Studies 103, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Kai-Hua WANG & Chi-Wei SU & Hsu-Ling CHANG & Ji MA & Cristina IOVU, 2017. "Purchasing Power Parity In China: An Empirical Investigation Based On Bootstrap Rollingwindow Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 166-181, December.

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