Empirical Research on the Time Lag of China´s Monetary Exchange Rate Transmission Mechanism

Time lag of monetary policy is a key index of estimating transmission efficiency, while exchange rate transmission mechanism is an important monetary transmission channel that cannot be neglected. In view of that, this paper takes the monthly data of 1998.1-2005.6 as sample, and empirically researched on the time lag of exchange rate transmission mechanism in China with the methods are known as impulse response function and variance decomposition. It is concluded that monetary policy can act on aggregate output and the price level through exchange rate transmission mechanism. However, the time lag and the reaction degree of final targets to different variables are not same. It offered some useful reference of monetary policy´s establishment and implementation