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China's Share of US Imports and Exchange Rate Pass‐through to US Import Prices
Author(s) -
Zhou Jianhuan,
Kim Donghun
Publication year - 2011
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2011.01244.x
Subject(s) - renminbi , china , exchange rate , economics , exchange rate flexibility , international economics , monetary economics , flexibility (engineering) , distortion (music) , effective exchange rate , exchange rate regime , amplifier , management , cmos , electronic engineering , law , political science , engineering
The present paper investigates the effect of China's share of US imports on the aggregate‐level exchange rate pass‐through to US import prices over the period from January 1999 to December 2008. The paper also focuses on the post‐reform period, after 2005, allowing greater flexibility of the RMB to explore the change in the role of the Chinese import share in determining the trend in the US exchange rate pass‐through. Evidence reveals that China's share of US imports has a negative effect on the exchange rate pass‐through. However, this negative effect has been moderated to a negligible level since China's exchange rate reform. An important implication is that the exchange rate flexibility of the RMB has been raised to a significant level may no longer cause distortion in the US competitive environment and prevent the USA from adjusting current accounts.