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

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  • Yuqing Xing

    (The National Graduate Institute for Policy Studies, 7-22-1, Roppongi, Minato-Ku, Tokyo 106-8867, Japan.)

Abstract
This paper estimated pass-through effects of the yuan's exchange rates on the prices of Japanese and the US imports from China. Empirical results show that, a 1% nominal appreciation of the yuan would result in a 0.23% increase in the prices of the US imports in the short run and 0.47% in the long run. Japanese import prices were relatively more responsive. 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%, an almost complete pass-through, in the long run. The high degree of pass-through effects on the prices of Japanese imports was also found at the disaggregated sectoral level: food, raw materials, apparel, manufacturing and machinery. However, further analysis indicates that, the high pass-through effects were mainly attributed to China's peg to the US dollar policy and that the dollar is used as a dominant invoicing currency for China's exports to Japan. The estimated low pass-through effects suggest that, a moderate appreciation of the yuan would have very little impact on China's exports.

Suggested Citation

  • Yuqing Xing, 2010. "The Yuan's Exchange Rates and Pass-through Effects on the Prices of Japanese and the US Imports," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 531-548, December.
    • Handle: RePEc:pal:compes:v:52:y:2010:i:4:p:531-548
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    Cited by:

    1. Aaditya Mattoo & Arvind Subramanian, 2011. "A China Round of Multilateral Trade Negotiations," Working Paper Series WP11-22, Peterson Institute for International Economics.
    2. Mattoo, Aaditya & Mishra, Prachi & Subramanian, Arvind, 2012. "Spillover effects of exchange rates : a study of the Renminbi," Policy Research Working Paper Series 5989, The World Bank.
    3. Ardiansyah Romadhon & Yutaka Ito & Keisuke Kawata & Yuichiro Yoshida, 2014. "The Effect of Tariffs on Imports : A Sector-Wise Analysis of Indonesia in 2001-2012," IDEC DP2 Series 4-4, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    4. Arintoko, 2011. "Exchange rate pass-through, import prices and inflation under structural breaks," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(1), pages 55-75, April.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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