Appendix Figure A.7 shows BLS import price and exchange rate changes for China,
which allowed the yuan to fluctuate against the dollar starting in July, 2005. The data show an
upward trend in the dollar/yuan exchange rate and in U.S. import prices, particularly starting in
2006. The available data did not support econometric estimation of exchange-rate pass-through
for U.S. imports from China due to the small number of observations available after the yuan was
allowed to fluctuate.13 However, due to the importance of China in U.S. trade, the extent to
which import prices for Chinese goods increase with the dollar exchange rate will have a large
effect on the overall estimate of U.S. exchange rate pass-through.