Imported Inputs,Productivity and RMB Exchange Rate Pass-through:An Empirical Study Based on Micro Firm-level Data
XIANG Xunyong, CHEN Ting
CHEN Feixiang(Institute of Industrial Economics,Jinan University;
College of Economics,Jinan University;
Antai College of Economics and Management,Shanghai Jiao Tong University
Abstract:
From the firm heterogeneity perspective, this paper studies the mechanism of RMB exchange rate pass-through in export market. Considering two heterogeneous firm characteristic—imported input share and productivity, and using firm-level micro data and highly disaggregated customs data from 2000 to 2006, this paper simultaneously analyzes how this two characteristics would affect RMB exchange rate pass-through. We find the pass-through is very high, and confirm that firms with higher import shares and higher productivity have lower exchange rate pass-through, the mechanism is that imported input share affect firm’s ability to hedge foreign exchange risk, and productivity is a key determinants of adjusting markup in export market.
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