| Summary: | 碩士 === 國立臺灣大學 === 經濟學研究所 === 99 === The purpose of this paper is to analyze how the exchange rate influences import prices and general consumer prices in Taiwan during January, 1981 to December, 2010. First, based on the price setting behavior of foreign exporting firms, we discuss the impact of exchange rate on import prices, and use the Quandt-Andrews approach to discover the structural break among variables in July, 1999. And then, we separate the whole sample into two subsamples by this structural break and observe how the exchange rates affect general consumer prices based on the price setting behavior of domestic importing firms.
The empirical result shows that the degree of exchange rate pass-through for import prices is smaller during July, 1999 to December, 2010 than during January, 1981 to June, 1999. We think the result is correlated with the exchange rate policy of the current central bank president, Huai-Nan Peng. In addition, we find that exchange rate and domestic income have no significant effects on general consumer prices in the two subsamples. On the other hand, the production costs of foreign firms have a greater influence on general consumer prices over the period 1999M7-2010M12 in comparison with the period 1981M1-1999M6 due to the rising of import trade dependence.
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