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A Study on the Pass-Through Rate of the Exchange Rate on the Liquid Natural Gas (LNG) Import Price in China

Graduate School of Humanities and Social Sciences, Saitama University, 255 Shimo-Okubo, Sakura-ku, Saitama 338-8570, Japan
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Int. J. Financial Stud. 2020, 8(4), 70; https://doi.org/10.3390/ijfs8040070
Received: 21 October 2020 / Revised: 6 November 2020 / Accepted: 9 November 2020 / Published: 16 November 2020
The Chinese liquid natural gas (LNG) import price has been unstable because the stability of LNG import prices is related to changes in the exchange rates. This paper analyzes the pass-through rate of the Chinese Yuan (CNY) and Japanese Yen (JPY) on the Chinese LNG import price. The Time-Varying Parameter vector autoregressive (TVP-VAR) model is adopted to verify the pass-through rate of the exchange rates on the LNG import price using the Markov chain Monte Carlo (MCMC) method. Since September 2005, the JPY pass-through rate on the Chinese LNG import price has been decreasing while that of the CNY has been increasing. Notably, the pass-through rate of CNY began to exceed that of JPY after 2008. Moreover, since 2005, the lag effect of the CNY on the Chinese LNG import price became longer compared to JPY. If any new currency reform of the CNY is implemented in the future, then the impact of JPY on the Chinese LNG import price could be reduced and the lag effect of the CNY on the Chinese LNG import price could become longer. Therefore, the fluctuation of the CNY is becoming an important factor in understanding the movements of the Chinese LNG import price. This implies the significance of considering the effect of the exchange rate on an energy market when the market is influenced by a monetary reform of the importing country. View Full-Text
Keywords: LNG import price; TVP-VAR model; pass-through rate; JPY; CNY LNG import price; TVP-VAR model; pass-through rate; JPY; CNY
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MDPI and ACS Style

Tang, C.; Aruga, K. A Study on the Pass-Through Rate of the Exchange Rate on the Liquid Natural Gas (LNG) Import Price in China. Int. J. Financial Stud. 2020, 8, 70. https://doi.org/10.3390/ijfs8040070

AMA Style

Tang C, Aruga K. A Study on the Pass-Through Rate of the Exchange Rate on the Liquid Natural Gas (LNG) Import Price in China. International Journal of Financial Studies. 2020; 8(4):70. https://doi.org/10.3390/ijfs8040070

Chicago/Turabian Style

Tang, Chaofeng, and Kentaka Aruga. 2020. "A Study on the Pass-Through Rate of the Exchange Rate on the Liquid Natural Gas (LNG) Import Price in China" International Journal of Financial Studies 8, no. 4: 70. https://doi.org/10.3390/ijfs8040070

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