Renminbi exchange rate pass-through onto prices of China´s agricultural exports to U.S.A. and implications for exchange rate policy

This paper investigates the exchange rate pass-through onto prices of China agricultural exports to markets of U.S.A. by use of unit root, cointegration tests and models under the hypothesis of asymmetry. The sample used in the paper covers the period January 1993 to January 2012. Moreover, we analyze the price discriminating behavior and currency invoicing decisions of China´s agricultural exporters in the presence of menu costs. Then, the paper also examines the significant reform of Renminbi exchange rate regime in July 2005 through dividing the whole sample period into two subsample periods. The results show that the degree of appreciation the exchange rate transmission to agricultural export prices of China is more incomplete than that of depreciation. As well the menu costs exist in the transmission process from changes of Renminbi to export prices. The outcomes show that the reform in 2005 deeply changed the transmission elasticity in addition.