Research on how RMB exchange rate influence on agricultural food prices in emerging market

Li Zhou

Abstract

With the development of economic globalization, the economic ties between countries in the world more and more closely, prices and the exchange rate are the core economic variables in an open economy. In this paper, we make a statistical analysis of RMB real effective exchange rate and agricultural food prices data from the year of 1990 to 2014.From the empirical analysis, the result shows that RMB real effective exchange rate will effect on agricultural food prices. LnREER at lag 1 period increased one percentage can drive LnAFP growth by 0.015 percentage, LnREER at lag 2 period increased one percentage can drive LnAFP growth by 0.187 percentage, so the effect of RMB real effective exchange rate on agricultural food prices is obvious. Based on granger causality test, it shows that LnREER is the granger reason to LnAFP, which means RMB real effective exchange rate is the reason to agricultural food prices increase. On this basis, we have put forward relevant policy suggestions.