The Industry Determinants of Exchange Rate Pass‐Through to Chinese Domestic Prices, 1980–2002

Previous research has found industry‐ and time‐varying effects of the exchange rate on domestic producer prices in China for the years 1980–2002. In this study, I examine the determinants of these variations. The variation of pass‐through elasticity across industries is explained by a set of variables that characterize market competitiveness, while the change of the pass‐through elasticity over time is interpreted by infrastructure development and the increasing proportion of non‐state‐owned enterprises in the economy, along with the structural break in years 1993–94. This study sheds light on the current debate on the effect of the urged appreciation of the Chinese Yuan.